The Reserve Bank of India has imposed a monetary penalty on Sri Bharathi Co-operative Urban Bank Limited, Hyderabad. The RBI penalty of ₹1.50 lakh was ordered on June 25, 2026, for violating key regulatory directions on loans and advances.
Key Details of the RBI Penalty
The RBI found two specific compliance failures during its inspection. First, the bank sanctioned loans to directors, violating rules on loans to related parties. Second, it failed to ensure small value loans made up at least 40% of its total loan portfolio as on March 31, 2025.
The RBI conducted a statutory inspection of the bank based on its financial position as on March 31, 2025. As a result, supervisory findings triggered a show-cause notice to the bank. The bank submitted a reply, made oral submissions, and provided additional documents during a personal hearing.
However, after reviewing all submissions, the RBI sustained both charges against the bank. Therefore, it exercised its powers under Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949, to impose the monetary penalty.
What This Means for Customers and the Bank
The RBI has clarified that this penalty targets regulatory non-compliance only. It does not question the validity of any transaction the bank has made with its customers. Additionally, the action does not prevent the RBI from initiating further proceedings against the bank if needed.
For customers, this penalty signals the RBI’s active oversight of urban co-operative banks. Meanwhile, the bank must address these compliance gaps to avoid future penalties. Small value lending norms exist to ensure co-operative banks serve their core low-income customer base effectively.
This case also highlights a broader RBI push to enforce director-related loan restrictions across urban co-operative banks. Such rules prevent conflicts of interest and protect depositors from insider lending risks. For example, similar penalties have been imposed on other UCBs across India in recent months.
Source: RBI Press Releases
