RBI Imposes Penalties on Three Karnataka Co-operative Banks over Regulatory Lapses

The Reserve Bank of India (RBI) has imposed monetary penalties on three urban co-operative banks located in Karnataka for failing to comply with various statutory and regulatory guidelines. The enforcement actions were taken through separate supervisory orders issued by the central bank following routine statutory inspections of the financial positions of these institutions. Among the affected institutions, Shri Vijay Mahantesh Co-operative Bank Ltd, based in Hungund (Bagalkote district), received a penalty of ₹2.50 lakh. The bank failed to classify certain non-performing asset (NPA) loan accounts accurately and violated regulations regarding the sanctioning of loans to directors and their related concerns. Similarly, The Pragathi Co-operative Bank Ltd in Karnataka was fined ₹2 lakh for violating Section 20 read with Section 56 of the Banking Regulation Act, 1949, by extending credit facilities to directors and exceeding single-borrower and inter-bank exposure limits. In addition, Vikas Souharda Co-operative Bank Limited, situated in Hosapete (Vijayanagara district), was penalized ₹1 lakh for non-compliance with RBI directives on income recognition, asset classification, and provisioning norms for Urban Co-operative Banks (UCBs). The central bank clarified that the monetary penalties are based on deficiencies in regulatory compliance and are not intended to pronounce upon the validity of any transaction or agreement entered into by the banks with their customers. The enforcement highlights RBI's continued focus on strengthening governance and credit discipline across co-operative banking networks.