The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹1 lakh (Rupees One lakh only) on The Kovilpatti Co-operative Urban Bank Limited, Tamil Nadu (the bank) for non-compliance with certain directions issued by RBI on ‘Prudential Norms on Capital Adequacy – Primary (Urban) Co-operative Banks (UCBs)’.
RBI conducted the statutory inspection of the bank with reference to its financial position as on March 31, 2025. Based on supervisory findings of non-compliance with RBI directions and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said directions.
Why penalty was imposed?
The bank had allowed the refund of share capital to its members and sanctioned certain loans without complying with the share linking to borrowing norms, despite its CRAR being less than the regulatory minimum.
