1. Executive Summary
The Reserve Bank of India (RBI) has imposed a monetary penalty on Bharat Co-operative Bank (Mumbai) Limited for non-compliance with specific regulatory directions. This action follows a statutory inspection based on the bank’s financial position as of March 31, 2025.
| Penalty Amount | ₹15 Lakh (Rupees Fifteen Lakh) |
| Date of Order | February 6, 2026 |
| Regulatory Violation | Non-compliance with directions on ‘Interest Rate on Deposits’. |
| Legal Basis | Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949. |
2. Root Cause Analysis (RCA)
The penalty stems from a specific operational deficiency identified during the RBI’s inspection. The core issue was the bank’s failure to adhere to interest payment protocols for premature withdrawals.
The bank failed to pay interest on certain eligible term deposits that were withdrawn prematurely.
- Process Failure: The mechanism for calculating interest on premature withdrawals was likely not aligned with the prevailing regulatory guidelines requiring interest payment on eligible deposits.
- Oversight in Eligibility Check: The system or manual verification process failed to flag these specific term deposits as “eligible” for interest despite the premature nature of the withdrawal.
3. Recommended Preventive Controls
To prevent recurrence of non-compliance regarding Interest Rate on Deposits, the following controls are recommended:
Automated CBS Logic
Hard-code regulatory interest logic into the Core Banking Solution (CBS) to automatically calculate applicable interest on premature withdrawals, removing manual discretion.
Pre-Disbursement Audit
Implement a “Maker-Checker” control specifically for premature closure requests to ensure interest eligibility is verified before payout.
Periodic Sampling
Internal Audit teams should conduct monthly random sampling of closed deposit accounts to verify interest payment accuracy against RBI master directions.
4. Lessons Learnt
This incident highlights critical takeaways for the bank’s compliance culture:
- Strict Adherence to Master Directions: Directions regarding ‘Interest Rate on Deposits’ are mandatory. Deviations, even if unintentional, attract monetary penalties.
- Supervisory Vigilance: The RBI’s statutory inspection is thorough. Findings from the March 31, 2025 position indicate that historical data is scrutinized rigorously.
- Customer Fairness: Denying interest on eligible deposits is viewed as a deficiency in regulatory compliance. Ensuring fair treatment of customers during premature exits is as critical as during onboarding.