**Executive Summary**
The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹2.50 lakh on The Arakonam Co-operative Urban Bank Limited, Tamil Nadu, due to contravention of provisions under the Banking Regulation Act, 1949 (BR Act) and non-compliance with certain RBI directions. The order was dated December 15, 2025. This action resulted from the statutory inspection of the bank's financial position as of March 31, 2025.
**Key Points / Main Content**
* **Penalty Imposition:**
* RBI imposed a monetary penalty of ₹2.50 lakh on The Arakonam Co-operative Urban Bank Limited.
* The penalty is for contravention of Section 17 read with Section 56 of the Banking Regulation Act, 1949 (BR Act).
* Non-compliance with RBI directions on 'Exposure Norms and Statutory / Other Restrictions – UCBs', 'Management of Advances – UCBs' and 'Know Your Customer (KYC)' also contributed to the penalty.
* **Inspection Findings:**
* The statutory inspection of the bank was conducted with reference to its financial position as on March 31, 2025.
* The inspection revealed 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.
* Sanctioning loans exceeding the prescribed regulatory limit to certain nominal members.
* Sanctioning gold loans under a bullet repayment scheme beyond the prescribed regulatory limit.
* Opening accounts non-compliant with KYC requirements.
* Failure to upload KYC records of customers onto Central KYC Records Registry (CKYCR) within the prescribed timeline.
**Impact Analysis**
**The Arakonam Co-operative Urban Bank Limited**
* **Impact:**
* The bank is subject to a monetary penalty of ₹2.50 lakh.
* The bank's reputation and operational credibility may be affected.
* The bank will likely face increased scrutiny from the RBI.
* **Action Required:**
* Pay the monetary penalty to the RBI.
* Implement corrective measures to address the identified deficiencies in regulatory compliance.
* Improve adherence to RBI guidelines to prevent future penalties.
Key Entities Referenced
Reserve Bank of India (RBI): The regulator that imposed the monetary penalty and conducted the inspection.
The Arakonam Co-operative Urban Bank Limited, Tamil Nadu: The urban bank on which the monetary penalty was imposed.
Banking Regulation Act, 1949 (BR Act): The act under which the penalty was imposed, specifically Section 17, 56, 47A(1)(c) and 46(4)(i).
'Know Your Customer (KYC)': Directions related to customer identification, and compliance failures related to KYC are the reason of penalty.
Central KYC Records Registry (CKYCR): The central repository where KYC records should have been uploaded.
प्रेस प्रकाशनी PRESS RELEASE
भारतीय ररज़र्व बैंक
RESERVE BANK OF INDIA
वेबसाइट
:
www.rbi.org.in/hindi
संचार वर्भाग, केंद्रीय कायाालय, शहीद भगत ससिंह मागा, फोटा, म िंबई - 400 001
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