RBI Imposes Rs 7.5 lakh penalty on Pusad Urban Cooperative Bank for regulatory violations

The Reserve Bank of India (RBI), through an order dated May 2, 2025, has levied a monetary penalty of ?7.50 lakh on The Pusad Urban Cooperative Bank Limited, Pusad, Maharashtra, for breaching multiple regulatory guidelines. The action pertains to non-compliance with RBI’s directives related to ‘Income Recognition, Asset Classification, Provisioning and Other Related Matters – UCBs’, ‘Co-operative Banks – Interest Rates on Deposits’, and specific instructions under the ‘Supervisory Action Framework (SAF)’.

This penalty was imposed under the powers granted to RBI by Section 47A(1)(c), read with Sections 46(4)(i) and 56 of the Banking Regulation Act.

The decision follows a statutory inspection of the bank conducted by the RBI based on its financials as of March 31, 2024. Subsequent supervisory assessments revealed several compliance lapses. A show-cause notice was issued to the bank, and after evaluating its written response and oral submissions, RBI determined that the violations warranted penal action.

Key findings included:

The bank regularised non-performing assets (NPAs) without recovery from legitimate sources.

It opened savings accounts for entities not eligible under RBI norms.

It offered deposit interest rates exceeding those provided by the State Bank of India, in violation of SAF guidelines.

RBI clarified that this penalty is solely for regulatory non-compliance and does not affect the validity of any transactions or contracts entered into by the bank with its customers. Furthermore, the penalty does not preclude the RBI from initiating other enforcement actions against the bank.