What changed
RBI, via an order dated June 25, 2026, imposed a ₹1 lakh penalty on The Chikmagalur District Co-operative Central Bank Ltd. for sanctioning director-related loans, contravening Section 20 read with Section 56 of the Banking Regulation Act, 1949. The action followed a NABARD inspection with reference to the bank's financial position as on March 31, 2025.
What it means for you
This penalty underscores RBI's zero-tolerance for self-dealing by co-operative banks. Lenders must ensure strict compliance with restrictions on loans to directors to avoid similar fines and reputational risk.
What you must do
- Review all loan portfolios for any director-related advances and ensure immediate recovery or regularization.
- Strengthen internal audit checks to flag and prevent director-related lending.
- Train board and credit staff on Section 20 of the BR Act restrictions for co-operative banks.
- Document compliance with NABARD inspection findings to preempt regulatory action.
Who it affects
The Chikmagalur District Co-operative Central Bank Ltd., All co-operative banks in India, NABARD-supervised lenders
What specific violation led to this penalty?
The bank sanctioned loans to its directors, which contravenes Section 20 read with Section 56 of the Banking Regulation Act, 1949.
Does this penalty affect the bank's customers?
No, RBI clarified the action is based on statutory compliance deficiencies and does not invalidate any customer transactions.
What is the penalty amount and when was it imposed?
The penalty is ₹1 lakh, imposed by RBI on June 25, 2026.
