RBI Imposes Monetary Penalties on Three Co-operative Banks for Regulatory Lapses

The Reserve Bank of India, by orders dated 22 May 2026, has imposed monetary penalties of Rs 2 lakh each on three co-operative banks for non-compliance with its directions. The banks penalised are The Jalore Central Co-operative Bank Limited (Rajasthan), Shree Laxmi Co-operative Bank Ltd. (Pune) and The Lunawada People’s Co-operative Bank Ltd. (District Mahisagar, Gujarat). RBI has stated that the actions are based on deficiencies in regulatory compliance and do not affect the validity of any transaction or agreement with customers.

The Jalore Central Co-operative Bank, a Rajasthan-based District Central Co-operative Bank, was penalised for failing to maintain a system of periodic review of risk categorisation of accounts and for not carrying out periodic updation of Know Your Customer (KYC) records as per the prescribed periodicity. Its statutory inspection had been carried out by the National Bank for Agriculture and Rural Development (NABARD) with reference to its financial position as on 31 March 2025.

Shree Laxmi Co-operative Bank, Pune, was found to have failed to carry out periodic review of risk categorisation, did not upload KYC records onto the Central KYC Registry (CKYCR) within the prescribed timeline, and levied penal charges for non-maintenance of minimum balance in violation of RBI directions on Maintenance of Deposit Accounts in Primary (Urban) Co-operative Banks and on Inoperative Accounts. The Lunawada People’s Co-operative Bank was penalised for sanctioning loans where relatives of its directors stood as guarantors, contrary to RBI directions on Loans and Advances to Directors, Relatives and Connected Firms.

For exam aspirants, the actions illustrate RBI’s powers under Section 47A read with Section 46(4)(i) and Section 56 of the Banking Regulation Act, 1949; the role of NABARD in inspecting co-operative banks; the importance of KYC and CKYCR; and the governance issues that have long affected India’s urban and rural co-operative banks.