The RBI penalty on UCO Bank has become a major regulatory development in February 2026. The Reserve Bank of India imposed a monetary penalty of ₹38.60 lakh on UCO Bank for non-compliance with certain regulatory directions related to savings account interest, locker rent refunds and credit reporting of Self Help Group (SHG) members.
The action was taken after supervisory findings revealed deficiencies in compliance with RBI guidelines.
Why RBI Penalty on UCO Bank Was Imposed
The RBI penalty on UCO Bank was imposed following the Statutory Inspection for Supervisory Evaluation (ISE 2025). The inspection was conducted with reference to the bank’s financial position as on March 31, 2025.
After reviewing the inspection findings and the bank’s reply to a show-cause notice, RBI concluded that regulatory violations were sustained and warranted a monetary penalty.
Key Reasons Behind RBI Penalty on UCO Bank
1️⃣ Non-Payment of Interest on Certain Savings Accounts
RBI found that UCO Bank did not pay interest on certain Savings Bank deposit accounts.
As per RBI guidelines:
- Interest must be calculated properly
- It must be credited periodically
- No eligible savings account should be left unpaid
Failure to pay savings interest directly impacts customers.
2️⃣ Failure to Report SHG Member-Level Credit Data
Another reason for the RBI penalty on UCO Bank was non-reporting of credit-related data of Self Help Group (SHG) members to Credit Information Companies (CICs).
Why this matters:
- SHG members depend on accurate credit records
- Non-reporting can impact credit scores
- It may affect future loan eligibility
Under the Credit Information Companies (Regulation) Act, banks must report data accurately and timely.
3️⃣ Locker Rent Refund Not Provided
RBI also observed that UCO Bank did not refund the proportionate amount of advance locker rent in certain cases where customers surrendered lockers prematurely.
According to RBI locker guidelines:
- Customers are entitled to proportionate refund
- Charges must be transparent
- Refunds must be processed fairly
This compliance lapse contributed to the RBI penalty on UCO Bank.
Legal Provisions Under Which Penalty Was Imposed
The RBI penalty on UCO Bank was imposed under:
- Section 47A(1)(c) read with Section 46(4)(i) and 51(1) of the Banking Regulation Act, 1949
- Section 25(1)(iii) read with Section 23(4) of the Credit Information Companies (Regulation) Act, 2005
These provisions empower RBI to impose monetary penalties for regulatory non-compliance.
Does RBI Penalty on UCO Bank Affect Customers?
Customers should note:
- Deposits remain safe
- Banking operations continue normally
- The penalty is regulatory in nature
- It does not invalidate customer transactions
RBI clarified that the action is based on compliance deficiencies and is without prejudice to any further action, if necessary.
What This Means for the Banking Sector
The RBI penalty on UCO Bank sends a strong message to the banking industry:
- Savings interest payments must be accurate
- Locker policies must be customer-friendly
- Credit reporting must be timely
- Regulatory compliance cannot be ignored
RBI has been consistently strengthening supervisory oversight in 2025–26 to protect customer interests and maintain financial discipline.
Final Takeaway
The RBI penalty on UCO Bank of ₹38.60 lakh may not be financially large for a public sector bank, but the regulatory message is significant.
Banks must ensure:
- Proper savings interest credit
- Transparent locker rent refunds
- Accurate SHG credit reporting
For customers, it is always advisable to:
- Regularly check savings interest credits
- Review locker agreements carefully
- Monitor credit reports periodically
The RBI penalty on UCO Bank highlights that regulatory compliance remains a top priority for India’s central bank.
