**Executive Summary**
RBI, via an order dated December 15, 2025, imposed a monetary penalty of ₹2.50 lakh on The Arakonam Co-operative Urban Bank Limited, Tamil Nadu, due to contravention of provisions of Section 17 read with Section 56 of the Banking Regulation Act, 1949 (BR Act) and non-compliance with certain directions issued by RBI. The penalty follows a statutory inspection of the bank's financial position as of March 31, 2025.
**Key Points / Main Content**
* **Monetary Penalty Imposed:**
* RBI imposed a penalty of ₹2.50 lakh on The Arakonam Co-operative Urban Bank Limited.
* The penalty is for contravention of statutory provisions and non-compliance with RBI directions.
* **Reasons for Penalty:**
* Failure to transfer 20% of net profit for financial years 2022-23, 2023-24, and 2024-25 to the Statutory Reserve.
* Sanctioned loans in excess of the prescribed regulatory limit to certain nominal members.
* Sanctioned gold loans under bullet repayment scheme beyond the prescribed regulatory limit.
* Opened accounts non-compliant with KYC requirements.
* Failure to upload KYC records to the Central KYC Records Registry (CKYCR) within the prescribed timeline.
* **Basis of Action:**
* The action is based on deficiencies in regulatory compliance.
* It is not intended to pronounce upon the validity of transactions between the bank and its customers.
* The penalty is without prejudice to any other action that may be initiated by RBI.
**Impact Analysis**
**The Arakonam Co-operative Urban Bank Limited**
* **Impact:** Faces a monetary penalty of ₹2.50 lakh. The findings from the statutory inspection will likely affect the bank's regulatory standing.
* **Action Required:** Must pay the penalty and address the identified deficiencies in regulatory compliance, specifically regarding statutory reserve transfers, loan sanctions, KYC compliance, and CKYCR uploads.
Key Entities Referenced
Reserve Bank of India (RBI): The regulator that imposed the monetary penalty.
The Arakonam Co-operative Urban Bank Limited, Tamil Nadu: The entity on which monetary penalty was imposed.
Banking Regulation Act, 1949 (BR Act): The act under which the penalty was imposed.
Section 17: Provision of the Banking Regulation Act, 1949, related to statutory reserve transfer.
Know Your Customer (KYC): RBI directions related to customer identification procedures that were violated.
प्रेस प्रकाशनी PRESS RELEASE
भारतीय ररज़र्व बैंक
RESERVE BANK OF INDIA
वेबसाइट
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Website : www.rbi.org.in Department of Communication, Central Office, Shahid Bhagat Singh Marg, Fort,
ई-मेल/email : helpdoc@rbi.org.in Mumbai - 400 001 फोन/Phone: 022 - 2266 0502
December 18, 2025
RBI imposes monetary penalty on The Arakonam Co-operative Urban Bank
Limited, Tamil Nadu
The Reserve Bank of India (RBI) has, by an order dated December 15, 2025,
imposed a monetary penalty of ₹2.50 lakh (Rupees Two Lakh Fifty Thousand only)
on The Arakonam Co-operative Urban Bank Limited, Tamil Nadu (the bank) for
contravention of provisions of Section 17 read with Section 56 of the Banking
Regulation Act, 1949 (BR Act) and non-compliance with certain directions issued by
RBI on ‘Exposure Norms and Statutory / Other Restrictions – UCBs’, ‘Management of
Advances – UCBs’ and ‘Know Your Customer (KYC)’. This penalty has been
imposed in exercise of powers conferred on RBI under the provisions of Section
47A(1)(c) read with Sections 46(4)(i) and 56 of the BR Act.
The statutory inspection of the bank was conducted by RBI with reference to its
financial position as on March 31, 2025. Based on supervisory findings of
contravention of statutory provisions / 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 provisions and directions. After considering the bank’s reply to the notice and
oral submissions made during the personal hearing, RBI found, inter alia, that the
following charges against the bank were sustained, warranting imposition of
monetary penalty:
The bank had:
i. failed to transfer 20% of its net profit for financial years 2022-23, 2023-24 and
2024-25 to the Statutory Reserve;
ii. sanctioned loans in excess of the prescribed regulatory limit to certain nominal
members;
iii. sanctioned gold loans under bullet repayment scheme beyond the prescribed
regulatory limit;
iv. opened accounts, which were non-compliant with KYC requirements; and
v. failed to upload the KYC records of customers onto Central KYC Records
Registry (CKYCR) within the prescribed timeline.
This action is based on deficiencies in regulatory compliance and is not intended
to pronounce upon the validity of any transaction or agreement entered into by the
bank with its customers. Further, imposition of this monetary penalty is without
prejudice to any other action that may be initiated by RBI against the bank.
(Brij Raj)
Press Release: 2025-2026/1732 Chief General Manager