1. Kolhapur District Central Co-op Bank Ltd., Maharashtra
Penalty: ₹13.30 Lakh| Order Date | July 17, 2026 |
|---|---|
| Regulatory Violation | Sanctioned director-related loans. Non-compliance with section 20(1) read with section 56 of the BR Act, 1949. |
| Inspecting Authority | NABARD (Financial position as of March 31, 2025) |
Root Cause Analysis (RCA)
- Inadequate checks during the loan origination process to identify conflicts of interest and borrower associations.
- Absence of a consolidated, digitized “Negative List” mapping Directors and their relatives within the Core Banking System (CBS).
Preventive Controls
- Mandatory execution of a “Related Party Declaration” by all borrowers during loan application.
- Implementation of a hard stop/system-level block in the Loan Origination System (LOS) that prevents sanctioning facilities to individuals sharing PAN/KYC identifiers with bank directors.
- Enhanced Maker-Checker protocols explicitly requiring compliance officer clearance for high-value loans.
Lessons Learnt
Statutory prohibitions on director-related loans are absolute. Cooperative banks must ensure that their appraisal mechanisms do not rely solely on manual declarations but are backed by systemic controls that independently verify borrower affiliations.
RBI Press Release
2. Sindhudurg District Central Co-operative Bank Ltd., Maharashtra
Penalty: ₹13.30 Lakh| Order Date | July 17, 2026 |
|---|---|
| Regulatory Violation | Sanctioned director-related loans. Contravention of section 20(1) read with section 56 of the BR Act, 1949. |
| Inspecting Authority | NABARD (Financial position as of March 31, 2025) |
Root Cause Analysis (RCA)
- Circumvention of manual appraisal safeguards regarding related-party transactions.
- Lack of periodic independent audits on the loan portfolio to flag anomalies related to politically or internally exposed persons.
Preventive Controls
- Integration of automated KYC cross-referencing to instantly flag matches between loan applicants and the Board of Directors’ database.
- Strict enforcement of Board-level approval requirements for any deviations, logged transparently for statutory auditors.
Lessons Learnt
Fiduciary duty mandates that board members recuse themselves from, and the bank actively prevents, any lending to entities where directors hold an interest. Governance structures must be independent of operational loan sanctioning.
RBI Press Release
3. Arvind Sahakari Bank Ltd., Katol, Maharashtra
Penalty: ₹11.00 Lakh| Order Date | July 16, 2026 |
|---|---|
| Regulatory Violation | Sanctioned loans to builders/contractors for land acquisition; paid additional interest to ineligible depositors (Directions on ‘Housing Finance for UCBs’ & ‘Interest Rate on Deposits’). |
| Inspecting Authority | RBI (Financial position as of March 31, 2025) |
Root Cause Analysis (RCA)
- Misinterpretation or ignorance of end-use restrictions specified in the ‘Housing Finance for UCBs’ guidelines.
- Flawed CBS parameterization that allowed manual overrides, enabling staff to apply premium interest rates to standard/ineligible deposit accounts.
Preventive Controls
- Strict product matrices must be enforced; real estate and commercial land acquisition loan products must be disabled for unauthorized categories in the LOS.
- Lock interest rate configurations in the CBS. Any deviations or premium rate applications must require centralized administrative approval.
- Mandatory post-disbursement end-use verification of funds.
Lessons Learnt
Regulatory directives on commercial real estate exposure and deposit interest limits require rigid system-level adherence. Permitting branch-level discretion on interest rates inevitably leads to compliance breaches.
RBI Press Release
4. The United Puri-Nimapara Central Co-operative Bank Limited, Odisha
Penalty: ₹3.00 Lakh| Order Date | July 14, 2026 |
|---|---|
| Regulatory Violation | Failed to upload KYC records of customers onto Central KYC Records Registry (CKYCR) within the prescribed timeline. |
| Inspecting Authority | NABARD (Financial position as of March 31, 2025) |
Root Cause Analysis (RCA)
- Reliance on manual data entry and extraction processes for CKYCR reporting.
- Absence of internal SLA monitoring to track the aging of newly opened accounts against CKYCR upload deadlines.
Preventive Controls
- Implement automated API integration between the bank’s CBS and the CKYCR portal for seamless, daily automated data uploads.
- Establish an internal compliance dashboard that flags accounts nearing their upload deadline (e.g., T+2 days).
Lessons Learnt
Data reporting obligations to central registries are time-critical. Manual processes are prone to failure and must be replaced by automated technological solutions to ensure zero-defect regulatory compliance.
RBI Press Release
5. Rajnandgaon Kendriya Sahakari Bank Maryadit, Chhattisgarh
Penalty: ₹1.00 Lakh| Order Date | July 16, 2026 |
|---|---|
| Regulatory Violation | Paid additional interest to certain ineligible depositors (Directions on ‘Interest Rate on Deposits’). |
| Inspecting Authority | NABARD (Financial position as of March 31, 2025) |
Root Cause Analysis (RCA)
- Improper classification of depositors during account opening, allowing ineligible entities to benefit from preferential rates (e.g., senior citizen or staff rates).
- Lack of system validation to cross-check age or employment status against the applied interest rate code.
Preventive Controls
- Automate interest rate application purely based on the customer’s Date of Birth (DOB) and profile type as verified by KYC documents.
- Conduct quarterly concurrent audits specifically sampling accounts receiving premium interest rates.
Lessons Learnt
Differential interest pricing is a strict regulatory privilege. Banks must ensure foolproof logic in their core systems to prevent revenue leakage and statutory violations through misclassification.
RBI Press Release
6. Shri Baria Nagarik Sahakari Bank Ltd., Gujarat
Penalty: ₹1.00 Lakh| Order Date | July 17, 2026 |
|---|---|
| Regulatory Violation | Failed to conduct Internal Audit during April 1, 2023, to March 31, 2025. |
| Inspecting Authority | RBI (Financial position as of March 31, 2025) |
Root Cause Analysis (RCA)
- Complete failure of corporate governance and oversight by the Audit Committee of the Board (ACB).
- Inadequate resource allocation or failure to appoint external chartered accountants to fulfill the internal audit mandate.
Preventive Controls
- The Board must establish and monitor an annualized Internal Audit Calendar.
- Mandatory agenda item in monthly Board meetings to review the status of internal audits and compliance closures.
- Outsource internal audit functions immediately if internal capability is lacking.
Lessons Learnt
Statutory audits do not replace the necessity for continuous, operational internal audits. An inactive Audit Committee directly exposes the bank to significant operational, financial, and regulatory risks.
RBI Press Release
7. Manmad Urban Co-operative Bank Ltd., Maharashtra
Penalty: ₹1.00 Lakh| Order Date | July 17, 2026 |
|---|---|
| Regulatory Violation | Sanctioned loans to the relative of its director. |
| Inspecting Authority | RBI (Financial position as of March 31, 2025) |
Root Cause Analysis (RCA)
- Failure in the credit appraisal phase to properly investigate and document the familial ties of the loan applicant.
- Over-reliance on the borrower’s self-declaration without cross-verifying against the bank’s internal register of directors’ relatives.
Preventive Controls
- Maintain and continuously update a comprehensive, digitized database of all directors, their businesses, and immediate relatives.
- Make “Relationship with Directors” a mandatory, audited field in the loan appraisal memorandum.
Lessons Learnt
Due diligence extends beyond assessing repayment capacity. Verifying the absence of related-party conflicts is a fundamental requirement of cooperative banking compliance.
RBI Press Release
8. Mandya District Co-operative Central Bank Ltd., Karnataka
Penalty: ₹50,000| Order Date | July 17, 2026 |
|---|---|
| Regulatory Violation | Held shares in other co-operative societies in contravention of section 19 read with section 56 of the BR Act, 1949. |
| Inspecting Authority | NABARD (Financial position as of March 31, 2025) |
Root Cause Analysis (RCA)
- Lack of awareness within the Investment Committee regarding statutory prohibitions against cross-holding shares in other cooperative societies.
- Failure of the compliance department to vet investment decisions against the Banking Regulation Act.
Preventive Controls
- Draft and enforce a rigorous Investment Policy vetted by legal/compliance experts ensuring alignment with RBI master circulars.
- Implement a mandatory compliance sign-off for any equity or share capital investments outside of approved government securities.
Lessons Learnt
Capital preservation and systemic risk prevention dictate that cooperative banks cannot indiscriminately invest in other cooperatives. All investment avenues must be strictly vetted against the BR Act.
RBI Press Release
9. The City Co-operative Bank, Hassan, Karnataka
Penalty: ₹50,000| Order Date | July 17, 2026 |
|---|---|
| Regulatory Violation | Failed to upload the KYC records of customers onto Central KYC Records Registry (CKYCR) within the prescribed timeline. |
| Inspecting Authority | RBI (Financial position as of March 31, 2025) |
Root Cause Analysis (RCA)
- Operational negligence and failure to allocate dedicated staff for handling CKYCR regulatory uploads.
- Treating KYC uploads as a periodic batch task rather than a daily operational requirement.
Preventive Controls
- Automate CKYCR data extraction from CBS to completely remove human dependencies.
- Appoint a dedicated Nodal Officer responsible for daily monitoring and resolution of CKYCR rejection reports.
Lessons Learnt
Routine compliance tasks must be embedded deeply into daily branch operations. Any backlog in centralized registry reporting is viewed strictly by regulators and impacts the broader anti-money laundering (AML) framework.