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RBI Tightens Grip on Co-op Banks, Slaps Fines on Four Urban Co-op Banks

The420.in
By The420.in
3 Min Read

In a move that reinforces its tightening grip on cooperative bank regulation, the Reserve Bank of India (RBI) has imposed monetary penalties on four Urban Cooperative Banks (UCBs) for violations of various directives related to income recognition, asset classification, interest rates, and governance norms.

Contents
Bank-Wise Breakdown of Violations and PenaltiesRBI’s Regulatory Crackdown on Cooperative Banking Sector

The penalties were levied under powers granted by Section 47A(1)(c), read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.

Bank-Wise Breakdown of Violations and Penalties

  • Pusad Urban Cooperative Bank Ltd., Pusad, Maharashtra
    Fined ₹7.50 lakh for failing to comply with multiple RBI regulations, including:

    • Income Recognition and Asset Classification (IRAC) norms

    • Interest Rates on Deposits

    • Directives issued under the Supervisory Action Framework (SAF)

  • Siddheshwar Urban Co-operative Bank Maryadit, Sillod, Aurangabad
    Penalized ₹50,000 for breaching RBI’s guidelines on the Placement of Deposits with Other Banks.

  • Hindusthan Co-operative Bank Ltd., Mumbai
    Fined ₹3.00 lakh for non-compliance with RBI’s directions on Maintenance of Deposit Accounts.

  • Deccan Merchants Co-operative Bank Ltd., Mumbai
    Penalized ₹2.00 lakh for violations related to Loans and Advances to Directors, Their Relatives, and Associated Firms.

These violations were identified during inspections and follow-up scrutiny, and the penalties were levied after reviewing the responses submitted by the banks.

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RBI’s Regulatory Crackdown on Cooperative Banking Sector

The penalties are part of a broader and more aggressive oversight framework introduced by the RBI during the financial year 2024–25, particularly targeting cooperative banks.

According to data compiled by Indian Cooperative, the RBI has:

  • Imposed penalties on 4 State Cooperative Banks (StCBs) and 51 District Central Cooperative Banks (DCCBs).

  • Taken stricter action against Urban Cooperative Banks (UCBs), with 215 penalties issued in a single year.

  • Placed seven UCBs under All-Inclusive Directions (AID)—curbing critical operations like deposit withdrawals.

  • Canceled licenses of 7 UCBs under AID and revoked licenses of 2 following merger procedures.

  • Removed 4 UCBs from AID after their operational performance improved.

These consistent and growing enforcement actions reflect the central bank’s resolve to safeguard depositor interests, enhance governance in the cooperative banking ecosystem, and mitigate potential systemic risks.

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