The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹10 lakh on Ashok Sahakari Bank Ltd., Ahmednagar, Maharashtra. The central bank issued this order on June 29, 2026. The RBI penalty on Ashok Sahakari Bank stems from non-compliance with Section 20(1) of the Banking Regulation Act, 1949.
Key Details of the RBI Penalty
The RBI conducted a statutory inspection of the bank based on its financial position as on March 31, 2025. Supervisory findings revealed clear regulatory violations. As a result, the RBI issued a show-cause notice to the bank, asking why a penalty should not be imposed.
After reviewing the bank’s reply, the RBI confirmed the charge against it. The bank had sanctioned a loan to one of its own directors. This directly violated Section 20(1) of the Banking Regulation Act, which prohibits such transactions. Therefore, the RBI found the charge fully sustained.
The RBI exercised its powers under Section 47A(1)(c), read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949, to impose this fine. These provisions give the central bank authority to penalise co-operative banks for regulatory breaches.
What This Means for Customers and the Bank
The RBI has clarified that this action targets only regulatory non-compliance. It does not question the validity of any transaction the bank made with its customers. However, customers should note that such penalties signal serious lapses in internal governance.
Additionally, the RBI has stated that this penalty does not prevent further action against the bank. The central bank may initiate other proceedings if needed. Meanwhile, the bank must strengthen its compliance framework to avoid future violations.
For Indian co-operative banks, this case is an important reminder. Lending to directors or related parties is strictly restricted under banking law. Banks must therefore maintain strong internal controls and audit processes to stay compliant.
The RBI continues to actively supervise co-operative banks across India. Regulatory enforcement actions like this one reflect the central bank’s commitment to sound banking practices. As a result, all scheduled and urban co-operative banks must review their loan sanction policies regularly.
Source: RBI Press Releases
