1. The Dakshin Dinajpur District Central Co-operative Bank Limited, West Bengal
Key Details
- Penalty Amount: ₹5.50 lakh
- Date of Order: September 02, 2025
- Inspecting Authority: National Bank for Agriculture and Rural Development (NABARD)
- Reference Date of Inspection: Financial position as of March 31, 2024
- Reason for Penalty: Non-compliance with specific RBI directions on ‘Know Your Customer (KYC)’.
Root Cause Analysis (RCA)
The bank failed in two main areas related to KYC compliance:
- It did not implement a system for the periodic review of the risk categorization of customer accounts, which should be done at least once every six months.
- It failed to upload customer KYC records to the Central KYC Records Registry (CKYCR) within the required timeframe.
Preventive Controls
- Automated Risk Review System: The bank should implement an automated system that flags accounts for periodic risk categorization reviews. This system can be configured to alert compliance officers when a review is due based on a six-month cycle.
- Automated CKYCR Uploads: The bank should integrate its core banking system with the Central KYC Records Registry (CKYCR) to ensure KYC records are automatically uploaded in real-time or through a daily batch process, well within the stipulated timeline.
- Compliance Training: Regular training sessions for staff on the importance of KYC compliance, proper risk categorization procedures, and the correct use of the CKYCR system should be a priority.
Lessons Learned
The penalty highlights the importance of maintaining an ongoing, dynamic KYC process rather than a one-time activity at account opening. Banks must actively manage customer information, periodically review risk classifications, and ensure timely and accurate data submission to regulatory databases like CKYCR.
2. Dahanu Road Janata Co-operative Bank Ltd., Dahanu Road, Maharashtra
Key Details
- Penalty Amount: ₹1 lakh
- Date of Order: September 01, 2025
- Inspecting Authority: Reserve Bank of India (RBI)
- Reference Date of Inspection: Financial position as of March 31, 2024
- Reason for Penalty: Non-compliance with specific directions issued under the Supervisory Action Framework (SAF).
Root Cause Analysis (RCA)
The bank did not adhere to the directions under the Supervisory Action Framework. Specifically, it failed to reduce both single and group borrower exposure limits by 25% of the applicable regulatory limit for certain new loans and advances. The SAF is a framework similar to the Prompt Corrective Action (PCA) framework for commercial banks, used by the RBI to ensure the expeditious resolution of financial stress in urban co-operative banks.
Preventive Controls
- Loan Sanctioning System: The bank should update its loan sanctioning system to automatically enforce the reduced exposure limits mandated by the SAF. The system should block or flag any new loan application that exceeds the new, lower threshold.
- Internal Audit: A robust internal audit function should be established to regularly review loan portfolios and ensure strict adherence to all regulatory limits, particularly those imposed under frameworks like SAF.
Lessons Learned
The case emphasizes the need for banks to not only understand but also strictly implement regulatory directives, especially those related to risk management and capital adequacy. Failure to comply with frameworks like SAF can lead to financial penalties and further supervisory actions.
3. The Urban Co-operative Bank Limited, Cuttack, Odisha
Key Details
- Penalty Amount: ₹4.50 lakh
- Date of Order: September 01, 2025
- Inspecting Authority: Reserve Bank of India (RBI)
- Reference Date of Inspection: Financial position as of March 31, 2024
- Reason for Penalty: Non-compliance with certain RBI directions on ‘Know Your Customer (KYC)’.
Root Cause Analysis (RCA)
The bank failed to upload the KYC records of its customers to the Central KYC Records Registry (CKYCR) within the prescribed timeline. The CKYCR is a centralized repository that allows customers to complete their KYC formalities only once with any financial institution regulated by the RBI, SEBI, IRDAI, and PFRDA.
Preventive Controls
- System Integration: The bank should prioritize integrating its customer onboarding and KYC verification systems with the CKYCR portal to ensure that all new and updated KYC records are uploaded automatically and in a timely manner.
- Audits and Reporting: Implement a system of daily or weekly audits to check for pending KYC record uploads to the CKYCR. Regular reports should be generated for the compliance department and senior management to monitor progress and identify any delays.
Lessons Learned
This case underscores the importance of technological compliance and timely data submission to central regulatory platforms. A robust and well-integrated system is essential to avoid manual errors and ensure that the bank meets its regulatory obligations.
4. The Pataliputra Central Co-operative Bank Limited, Bihar
Key Details
- Penalty Amount: ₹2.02 lakh
- Date of Order: September 01, 2025
- Inspecting Authority: National Bank for Agriculture and Rural Development (NABARD)
- Reference Date of Inspection: Financial position as of March 31, 2024
- Reason for Penalty: Non-compliance with RBI directions on ‘Know Your Customer (KYC)’ and ‘Membership of Credit Information Companies (CICs) by Co-operative Banks’.
Root Cause Analysis (RCA)
The bank had two key areas of non-compliance:
- It failed to establish a system for the periodic review of risk categorization of accounts at least once every six months.
- It failed to submit credit information of its customers to three credit information companies (CICs). The RBI has mandated that all co-operative banks must become members of all CICs and provide them with credit data to prevent incomplete credit information.
Preventive Controls
- Dual Compliance System: The bank needs a comprehensive compliance system that addresses multiple regulatory requirements simultaneously. This includes automating the KYC risk review process and ensuring a reliable data feed to all required CICs.
- Dedicated CIC Team: A small team or a designated individual should be made responsible for managing the bank’s relationship with CICs, ensuring membership is maintained and credit data is submitted accurately and on time.
Lessons Learned
This case highlights that regulatory compliance is multi-faceted, and failure in one area can lead to a domino effect of non-compliance. Banks must not only meet KYC requirements but also fulfill their obligations regarding data sharing with financial ecosystem partners like CICs to ensure the integrity of the credit system.