RBI has imposed a fine of Rs 1.3 million on The Chikhli Urban Co-operative Bank in Maharashtra

Traders Union
All News
Central Banks
RBI penalty on Chikhli Bank

Highlights

The Reserve Bank of India imposed a fine of Rs 1.3 million on The Chikhli Urban Co-operative Bank under the order dated July 8, 2026.
The penalty was imposed for failure to comply with Section 26A and 56 of the Banking Regulation Act, 1949, KYC, and directives on ‘Finance for Housing Schemes, UCBs’.
RBI found that the bank did not transfer unclaimed amounts to DEAF, sanctioned improper loans for land acquisition, and had weak suspicious transaction monitoring systems.

This article was translated from the original. Read the original version by our correspondent here.

Inspection Findings and Basis for Penalty

As stated in the Reserve Bank of India press release, the penalty was imposed under the order dated July 8, 2026, for violations of Section 26A read with Section 56 of the Banking Regulation Act, 1949, and non-compliance with certain RBI directives on ‘Finance for Housing Schemes, UCBs’ and ‘Know Your Customer (KYC)’. The penalty was levied by RBI using powers under Section 47A(1)(c) read with Section 46(4)(i) and Section 56.

RBI had issued a show cause notice to the bank, asking why penalty should not be imposed for non-compliance with the relevant provisions and directives. After considering the bank’s response, additional submissions, and oral arguments during the personal hearing, the central bank found several charges substantiated and deemed the monetary penalty appropriate.

According to RBI, the bank failed to transfer eligible unclaimed amounts to the Depositor Education and Awareness Fund within the stipulated period. The bank sanctioned loans to builders and contractors for land acquisition, and did not implement robust software systems for effective identification and reporting of suspicious transactions.

Impact on the Cooperative Banking Sector

This action signals to cooperative banks that RBI’s oversight on regulatory compliance, customer identification standards, and statutory obligations related to deposits remains stringent. For urban cooperative banks in particular, settlement of unclaimed deposits, loan sanctioning standards, and strengthening of suspicious transaction monitoring systems continue to be key compliance areas.

RBI has clarified that this action is based on deficiencies in statutory and regulatory compliance and does not constitute a decision on the validity of any transaction or agreement between the bank and its customers. The central bank also stated that this monetary penalty is imposed without prejudice to any other action that may be initiated against the bank in the future.

Our previous report detailed the enforcement action under FEMA against Kalanee Impex Private Limited and the findings from searches at Mumbai premises. It mentioned ongoing investigations into issues such as non-realization of export proceeds on time, alleged undisclosed foreign companies/accounts, and the legitimacy of third-party remittances. This background demonstrates that regulatory agencies’ monitoring and enforcement actions remain stringent for compliance lapses—whether in foreign transactions or banking processes.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.