The RBI has imposed penalties on five cooperative banks. They are accused of violating regulations. Some failed to comply with loan and security guidelines. Let’s explore the impact this will have on customers.
RBI Action: The Reserve Bank of India (RBI) has imposed monetary penalties on five banks. The RBI announced this in a press release dated September 29, 2025. This action was taken due to non-compliance with various guidelines issued under the Banking Regulation Act, 1949. The RBI regulates all banks across the country and protects the interests of customers. Whenever a bank or NBFC violates regulations, it imposes penalties.
Beed District Central Co-operative Bank Limited, located in Maharashtra, has been fined ₹2.25 lakh. The Panchsheel Mercantile Co-operative Bank Limited, located in Surat, Gujarat, has been fined ₹1 lakh. The Sultans Battery Co-operative Urban Bank Limited, located in Wayanad, Kerala, has been fined ₹1 lakh, and The Nilambur Co-operative Urban Bank Limited, located in Wayanad, Kerala, has been fined ₹50,000. Kamaraj Co-operative Town Bank Limited, located in Tamil Nadu, has been fined ₹1 lakh.
Why did the RBI take this action?
Beed District Central Co-operative Bank Limited: This bank failed to transfer eligible unclaimed funds to the Depositor Education and Awareness Fund within the stipulated time. It also failed to submit loan information about its customers to four CICs. For some accounts, it failed to complete the required customer due diligence (CDD) process when establishing the account relationship.
The Panchsheel Mercantile Co-operative Bank Limited: This bank failed to enable its customers to immediately “reply” to SMS alerts, a requirement for registering objections regarding unauthorized electronic banking transactions.
The Sultans Battery Co-operative Urban Bank Limited: This bank sanctioned loans related to directors, violating RBI guidelines on loans and advances.
The Nilambur Co-operative Urban Bank Limited: This bank offered higher interest rates on non-resident (external) rupee deposits than on corresponding domestic fixed deposits.
Kamaraj Co-operative Town Bank Limited: This bank violated several guidelines under the SAF. The single borrower exposure limit for new loans and advances was not reduced to 50% of the applicable regulatory limit. New loans and advances were sanctioned and disbursed without the collateral security of FD/NSC/KVP insurance policies. The balance sheet and deposit size were also increased.
Will this impact customers?
During an inspection, the RBI identified deficiencies in banks’ compliance with guidelines. Show-cause notices were issued to the banks. The decision to impose penalties was based on the responses to the notices and oral submissions made during the personal hearing. The Reserve Bank has clarified that this action will not impact any transactions or agreements between the banks and their customers. Account holders need not worry.
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