In six orders announced on March 23, the Reserve Bank of India (RBI) imposed monetary penalties totaling ₹3.60 lakh on five cooperative banks and one non-banking financial company (NBFC), Vedvyas Finance Pvt Ltd.
The fines, ranging from ₹30,000 to ₹1 lakh, targeted violations of Know Your Customer (KYC) norms, governance guidelines, and provisions of the Banking Regulation Act. Institutions such as The Tanur Cooperative Urban Bank Ltd in Kerala, Kodagu District Cooperative Central Bank Ltd in Karnataka, Mysore and Chamarajnagar District Cooperative Central Bank Ltd in Karnataka, Pali District Central Cooperative Bank Ltd in Rajasthan, Loknete R.D. Appa Kshirsagar Sahakari Bank Ltd in Maharashtra, and Vedvyas Finance faced penalties for lapses ranging from KYC failures and loans to directors to a governance breach.
The central bank issued six separate orders, affecting cooperative banks and an NBFC across states like Kerala, Karnataka, Rajasthan, Maharashtra, and Odisha.
KYC BREACHES AT FORE
KYC violations featured prominently, with institutions penalised for failing to upload KYC records to the Central KYC Records Registry and to review account risk categorisation periodically. Tanur Cooperative Urban Bank was fined ₹50,000 for failing to upload KYC records of customers onto the Central KYC Records Registry (CKYCR). Mysore and Chamarajnagar District Cooperative Central Bank Ltd was fined ₹1 lakh for holding shares in a cooperative society in violation of the Banking Regulation Act and failing to upload customer KYC records to CKYCR within the prescribed timeline. Pali District Central Cooperative Bank was fined ₹50,000 for non-compliance with RBI directions on KYC, including failure to put in place a system for periodic review of account risk categorisation.
Vedvyas Finance Private Limited, an NBFC, was fined ₹30,000 for failing to comply with governance-related directions, as it did not obtain RBI's prior written permission before appointing a director, resulting in a change in management because more than 30% of its directors, excluding independent directors, changed. In all cases, RBI emphasized that the penalties were based on deficiencies in regulatory compliance and were not intended to pronounce on the validity of any transaction or agreement entered into with customers.
GOVERNANCE AND LENDING LAPSES
Governance failures and lending norm breaches also drew scrutiny. Kodagu District Cooperative Central Bank was fined ₹1 lakh for contravening Section 20 of the Banking Regulation Act, 1949, after a statutory inspection by NABARD; RBI found that the bank had sanctioned director-related loans.
Loknete R.D. Appa Kshirsagar Sahakari Bank was fined ₹30,000 for non-compliance with RBI directions on loans and advances to directors, their relatives, and firms in which they have an interest, as well as for contravening Sections 20(1) and 35(2) of the Banking Regulation Act; it had sanctioned loans to two of its directors and failed to furnish requisite information during inspection.
BROADER REGULATORY CONTEXT
Each order states that the penalty is without prejudice to any other action that may be initiated by RBI.
Total penalties amounted to ₹3.60 lakh across the six cases.