1. Key Incident Details
The Reserve Bank of India (RBI) has imposed a monetary penalty based on deficiencies in regulatory compliance observed during the statutory inspection with reference to the financial position as on March 31, 2025.
| Entity Name | The Co-operative Urban Bank Limited, Parlakhemundi, Odisha |
| Penalty Amount | ₹13,000 (Thirteen Thousand Rupees) |
| Order Date | December 9, 2025 |
| Regulatory Basis | Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949; Section 25 read with Section 23 of the CIC Act, 2005. |
2. Nature of Violations
The penalty was levied due to non-compliance with specific RBI directions in two core areas:
- Supervisory Action Framework (SAF) Violation: The bank incurred capital expenditure without obtaining prior approval from the RBI, which is a mandatory requirement for banks placed under the SAF.
- Credit Information Companies (CIC) Reporting: The bank failed to submit credit information of its customers to all four authorized Credit Information Companies (CICs), violating the mandate for comprehensive credit data reporting.
3. Root Cause Analysis (RCA)
Why did the SAF Violation occur?
- Process Gap: Lack of an internal “stop-check” mechanism in the procurement process to verify SAF status before authorizing capital expenses (CAPEX).
- Awareness Deficit: Potential lack of understanding among operational management regarding the specific restrictions imposed under the Supervisory Action Framework.
Why did the CIC Reporting fail?
- Technical Limitation: The Core Banking Solution (CBS) may not have been configured to generate data formats compatible with all four CICs simultaneously.
- Procedural Oversight: A misconception that reporting to one major bureau (e.g., CIBIL) fulfills the regulatory requirement, neglecting the other three (Equifax, Experian, CRIF High Mark).
4. Recommended Preventive Controls
To prevent recurrence, the following internal controls should be implemented immediately:
For Capital Expenditure (SAF Compliance):
- CAPEX Approval Matrix: Update the financial delegation of authority to automatically flag any capital expenditure for Compliance Officer review if the bank is under SAF.
- Regulatory Impact Assessment: Before any asset purchase, the Finance Department must document a “Regulatory Clearance Note” confirming no RBI restrictions apply.
For Credit Information Reporting:
- Automated CIC Dashboard: Implement a dashboard tracking submission receipts from all four CICs monthly.
- Maker-Checker Validation: Designate a nodal officer responsible for verifying the “Upload Success Reports” from all four bureaus before closing the monthly compliance cycle.
5. Lessons Learnt
This penalty highlights that partial compliance is viewed as non-compliance. Reporting to some credit agencies but not all is a actionable violation. Furthermore, banks under the Supervisory Action Framework (SAF) must treat RBI permissions not as a formality, but as a hard prerequisite for any financial outlay outside of operational expenses. Institutional memory of regulatory restrictions must be embedded in the IT systems (e.g., blocking CAPEX GL codes) rather than relying solely on human memory.