What changed
RBI issued a penalty order on June 19, 2026, fining the bank ₹5 lakh for non-compliance with directions on loans to directors' relatives. The charge was sustained after the bank's reply and personal hearing.
What it means for you
This reinforces RBI's strict stance on related-party lending in cooperative banks. Banks must ensure no loans are sanctioned to relatives of directors, as even a single instance can lead to penalties and supervisory scrutiny.
What you must do
- Review all loan sanctions to ensure no director's relative is a beneficiary.
- Strengthen internal controls to flag and prevent related-party transactions.
- Train staff on RBI's 'Loans and Advances to Directors' directions.
- Conduct periodic audits of loan portfolios for compliance with these norms.
Who it affects
Hutatma Sahakari Bank Ltd., Walva, Maharashtra, All cooperative banks in India, Bank directors and compliance officers
What specific violation led to the penalty?
The bank sanctioned a loan to a relative of one of its directors, which contravenes RBI's directions on loans and advances to directors and their relatives.
Does this penalty affect the bank's customers?
No, RBI clarified the action is based on regulatory compliance deficiencies and does not question the validity of any customer transaction or agreement.