1. The Pattukottai Co-operative Urban Bank Limited, Tamil Nadu
Penalty Amount
₹1.50 Lakh
Order Date
Dec 05, 2025
Reference Position
March 31, 2024
Regulatory Deficiencies
- • Reserve Management: Failure to transfer 20% of net profit (FY 2023-24) to the Statutory Reserve (Contravention of Sec 17, BR Act).
- • Exposure Norms: Sanctioned loans to “nominal members” exceeding regulatory limits.
- • KYC Ops: Failure to upload KYC records to Central KYC Records Registry (CKYCR) within timelines.
| Root Cause Analysis (RCA) | Preventive Controls |
|---|---|
|
Process Gap: Manual handling of year-end profit appropriations without a maker-checker validation for statutory transfers. System Limitation: Core Banking Solution (CBS) likely lacked a hard parameter lock for “Nominal Member” loan caps. |
Automated Hard Stops: Implement system-level caps in the Loan Origination System (LOS) specifically for Customer Type “Nominal Member”. Integration: Deploy API-based real-time upload to CKYCR instead of manual bulk file uploads. |
Lesson Learnt
Statutory transfers are non-negotiable legal mandates, not internal policy choices. Financial closure checklists must explicitly include “Section 17 Compliance” as a gating item before balance sheet finalization.
RBI Press Release
2. The Yavatmal Urban Co-operative Bank Ltd., Maharashtra
Penalty Amount
₹2.25 Lakh
Order Date
Dec 04, 2025
Reference Position
March 31, 2025
Regulatory Deficiencies
- • Concentration Risk: Sanctioned loans to nominal members in excess of prescribed limits.
- • Credit Reporting: Failed to report “Wilful Defaulters” to Credit Information Companies (CICs) within the mandatory timeline.
| Root Cause Analysis (RCA) | Preventive Controls |
|---|---|
|
Data Integrity: “Nominal Member” flags may be missing in the master data, allowing standard loan limits to apply erroneously. Reporting Latency: Wilful defaulter classification is often a manual committee process; the gap lies in the time between “Committee Decision” and “Data Entry” for CIC reporting. |
CIF-Level Validation: Ensure the unique Customer ID (CIF) enforces the nominal member limit across all loan products, not just individual accounts. Workflow Trigger: Automate the CIC reporting file generation immediately upon tagging a user as ‘Wilful Defaulter’ in the system. |
Lesson Learnt
Concentration risk is not just about single-borrower limits but also about specific categories (like Nominal Members). Reporting to CICs is a critical regulatory obligation; delays here signal poor data governance.
RBI Press Release
3. The Assam Co-operative Apex Bank Limited, Guwahati
Penalty Amount
₹50,000
Order Date
Dec 01, 2025
Reference Position
March 31, 2025
Regulatory Deficiencies
- • Risk Management: Failed to carry out periodic review of risk categorization of accounts (required minimum periodicity: once every 6 months).
| Root Cause Analysis (RCA) | Preventive Controls |
|---|---|
|
Static Data: Risk categorization (High/Medium/Low) is treated as a “one-time” onboarding field rather than a dynamic attribute. Lack of Triggers: Absence of a scheduled batch job (Job Scheduler) in the CBS to flag accounts due for review. |
Dynamic Risk Scoring: Implement an algorithmic “Risk Engine” that re-calculates risk scores based on transaction volume, velocity, and corridor every 6 months. Dashboarding: Create a “KYC Expiry” dashboard for branch managers that highlights accounts pending risk review. |
Lesson Learnt
KYC is a lifecycle event, not just an onboarding task. Risk profiles change as customer behavior changes; systems must be agile enough to reflect this evolution periodically (at least biannually).