What changed
RBI issued a penalty order on June 25, 2026, against the bank for non-compliance with directions on director-related loans and small-value loan norms. The action followed a statutory inspection as of March 31, 2025, which revealed sustained violations.
What it means for you
Banks must strictly adhere to RBI's restrictions on loans to directors and their related entities. The 40% small-value loan threshold for UCBs is a binding requirement; falling short invites monetary penalties. This reinforces RBI's zero-tolerance for regulatory non-compliance.
What you must do
- Review all loan sanctions to ensure no director-related loans are extended without explicit RBI approval.
- Monitor small-value loan portfolio composition to meet the 40% minimum threshold at all reporting dates.
- Strengthen internal audit and compliance checks to catch such breaches before statutory inspections.
Who it affects
Sri Bharathi Co-operative Urban Bank Limited, Hyderabad, All Primary (Urban) Co-operative Banks (UCBs), Compliance officers and internal audit teams of UCBs
What is the small-value loan requirement for UCBs?
UCBs must ensure that small-value loans constitute at least 40% of their aggregate loans and advances as on March 31, 2025.
