RBI Imposes Monetary Penalty on 2 Karnataka based Co-operative Banks for Compliance Deficiencies

By Vineet Malik | August 26, 2026 | India

The Reserve Bank of India (RBI) imposed fines on two Banks for breaching regulatory compliance citing alleged vested interest. The Pragathi Co-operative Bank Lt’d and Shri Vijay Mahantesh Co-operative Bank Lt’d were fined Rs.2 Lakh and Rs.2.50 Lakh in violation of “Loans and Advances” rules and more

The RBI vide two orders passed last Thursday, took stringent action against the said Banks to warn and set a strong precedent against other Banks possibly going ahead in the similar direction.

The Pragathi Co-operative Bank Lt’d

The Bank contravened the provisions of Section 20 and 56 of the Banking Regulation Section Act, 1949 (BR Act) for issuing Loans and Advances to its Directors, their Relatives and Firms/Concerns along with violations pertaining to restrictions, classification, valuation and operation of investment portfolio of primary (Urban) Co-operative Banks.

The RBI conducted statutory inspection to ascertain the errant financial position of the Bank and further inferred the commission of contravention of such provisions.

The Violations :

• Sanctioned Director related Loans

• Breached the prescribed Regulatory limit for Single borrower exposure

• Breached the prudential inter-bank (gross) exposure limit and inter-bank counter-party limit

Shri Vijay Mahantesh Co-operative Bank Lt’d

The Bank contravened certain directions issued by the RBI pertaining to ‘Income Recognition’, Asset Classification, Provisioning and other related matters and Loans and Advances to its Directors, their Relatives and Concerns.

After considering the reply received from the Bank, the RBI sustained the charges imposed and imposed monetary penalty.

 The Violations :

• Failed to classify certain Loan accounts as Non-Performing Assets (NPAs)

• Sanctioned Director related Loans

Both the orders passed by the RBI speak volumes about the irregularities committed by the said two Co-operative Banks based in Southern West India.