**Executive Summary**
The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹1 lakh on The Kovilpatti Co-operative Urban Bank Limited, Tamil Nadu, for non-compliance with RBI directions on Prudential Norms for Urban Co-operative Banks. The penalty was imposed via an order dated December 10, 2025, under provisions of the Banking Regulation Act, 1949. The action follows a 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 ₹1 lakh on The Kovilpatti Co-operative Urban Bank Limited.
* The order was issued on December 10, 2025.
* **Reason for Penalty:**
* The penalty is for non-compliance with RBI directions on 'Prudential Norms on Capital Adequacy - Primary (Urban) Co-operative Banks (UCBs)'.
* The bank allowed 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.
* **Legal Basis:**
* The penalty was imposed under the powers conferred by Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.
* **Inspection and Notice:**
* The statutory inspection of the bank was conducted with reference to its financial position as on March 31, 2025.
* RBI issued a notice to the bank to show cause as to why the penalty should not be imposed.
* **Clarification:**
* The 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.
* The monetary penalty does not prejudice any other action that RBI may initiate against the bank.
**Impact Analysis**
**The Kovilpatti Co-operative Urban Bank Limited, Tamil Nadu**
* **Impact:** Financial loss of ₹1 lakh due to the penalty. Reputational damage due to regulatory non-compliance. Potential for further action by RBI.
* **Action Required:** Ensure strict compliance with RBI directions to avoid future penalties. Review and rectify the identified deficiencies in lending practices and capital adequacy.
Key Entities Referenced
Reserve Bank of India (RBI): The regulator imposing the monetary penalty.
The Kovilpatti Co-operative Urban Bank Limited, Tamil Nadu: The entity on which the monetary penalty is imposed.
Banking Regulation Act, 1949: The Act under which the powers were exercised for imposing penalty.
Prudential Norms on Capital Adequacy - Primary (Urban) Co-operative Banks (UCBs): RBI directions for non-compliance, leading to the penalty.
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 15, 2025
RBI imposes monetary penalty on The Kovilpatti Co-operative Urban Bank
Limited, Tamil Nadu
The Reserve Bank of India (RBI) has, by an order dated December 10, 2025,
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)’. 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 Banking Regulation Act, 1949.
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 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. 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 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.
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: 2025-2026/1703 Chief General Manager