RBI Cracks Down on Co-Op Banks for Compliance Failure

 

 

In a sweeping regulatory move, the Reserve Bank of India (RBI) has canceled the licenses of 58 Urban Co-operative Banks (UCBs) since 2020, Union Minister of State for Finance Pankaj Chaudhary informed the Lok Sabha. This crackdown follows the implementation of the Banking Regulation (Amendment) Act, 2020, which has bolstered RBI’s oversight on cooperative banks, introducing stricter regulations on management, audits, capital adequacy, and restructuring.

Under the new governance framework, cooperative banks must comply with stringent provisions under Sections 10, 10A, 10B, 35B, and 36AB of the Banking Regulation Act, ensuring better financial discipline. To protect depositors, the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act offers coverage of ₹5 lakh per depositor across savings, fixed, current, and recurring accounts—a significant increase from the previous ₹1 lakh limit.

Adding to its enforcement actions, the RBI recently imposed monetary penalties on five cooperative banks for violating banking regulations. The affected banks include:
Gurdaspur Central Cooperative Bank (Punjab) – ₹1 lakh fine for breaches under Section 20 read with Section 56 of the Banking Regulation Act.

Baramulla Central Cooperative Bank (J&K) – ₹5 lakh penalty for violating RBI’s directive prohibiting fresh deposits.
Anantnag Central Cooperative Bank (J&K) – ₹1 lakh fine for similar violations.
Jogindra Central Cooperative Bank (Himachal Pradesh) – ₹1 lakh penalty for regulatory non-compliance.
Janata Sahakari Bank (Gondia, Maharashtra) – ₹1.5 lakh fine for breaching Section 26A read with Section 56.

These penalties, issued under Section 47A(1)(c) read with Sections 46(4)(i) and 56, reaffirm RBI’s zero-tolerance policy towards non-compliance. With governance failures in cooperative banks posing rising concerns, the RBI continues to tighten controls, ensuring transparency, accountability, and financial stability in the sector.