RBI imposes monetary penalty on The Batlagundu Co-operative Urban Bank Limited, Tamil Nadu

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹1 lakh on The Batlagundu Co-operative Urban Bank Limited, located in Tamil Nadu. This penalty was issued through an order dated July 21, 2025, due to the bank’s non-compliance with RBI’s guidelines related to capital adequacy norms for Urban Co-operative Banks (UCBs) and instructions under the Supervisory Action Framework (SAF).

The RBI conducted a statutory inspection of the bank based on its financial status as of March 31, 2024, and identified several lapses. These included the sanctioning of loans without following the rule of linking shareholding to borrowings, even though the bank’s Capital to Risk-Weighted Assets Ratio (CRAR) was below the required minimum.

Additionally, the bank sanctioned high-risk loans with risk weights over 100% and exceeded the allowed limit for loans given to a single borrower, both of which were in violation of SAF guidelines. Following these findings, the RBI issued a show-cause notice to the bank.

After reviewing the bank’s written and oral responses, the RBI concluded that the violations were valid and a monetary penalty was appropriate. It clarified, however, that this penalty is purely for regulatory non-compliance and does not affect the legality of the bank’s transactions with its customers. Moreover, this action does not prevent the RBI from taking further steps against the bank, if necessary.