The Kovilpatti Co-operative Urban Bank Limited, Tamil Nadu

Following a statutory inspection with reference to the bank's financial position as on March 31, 2025, RBI issued a show-cause notice based on supervisory findings of non-compliance with its directions on 'Prudential Norms on Capital Adequacy - Primary (Urban) Co-operative Banks (UCBs)'. RBI found that the bank had allowed refund of share capital to its members and sanctioned certain loans without complying with the share-linking-to-borrowing norms, even though its CRAR was below the regulatory minimum. After considering the bank's reply and oral submissions, RBI imposed a monetary penalty under Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.

The bank must pay the ₹1 lakh penalty and remain subject to RBI supervision. The release does not impose a new operational restriction, but the underlying compliance lapses may expose the bank to further regulatory action if similar violations continue.