What changed

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹1 lakh on The Kodagu District Co-operative Central Bank Limited. This action stems from the bank's contravention of Section 20 read with Section 56 of the Banking Regulation Act, 1949, specifically for sanctioning director-related loans. The penalty was issued by order dated March 20, 2026, following a statutory inspection by NABARD.

This enforcement action highlights the importance of adhering to regulatory requirements concerning loans to directors. While this specific penalty is for a past violation, it serves as a reminder to all cooperative banks to review their internal policies and procedures to ensure compliance with lending regulations. Failure to comply could result in further regulatory action or penalties.

What to do next

Review internal policies on director-related loans
Ensure compliance with Section 20 and Section 56 of the Banking Regulation Act, 1949

Penalties

₹1 lakh

Source document (simplified)

Press Releases

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| Date : Mar 23, 2026 | |
| RBI imposes monetary penalty on The Kodagu District Co-operative Central Bank Limited, Karnataka | |
| | The Reserve Bank of India (RBI) has, by an order dated March 20, 2026, imposed a monetary penalty of ₹1 lakh (Rupees One Lakh only) on The Kodagu District Co-operative Central Bank Limited, Karnataka (the bank) for contravention of provisions of Section 20 read with Section 56 of the Banking Regulation Act, 1949 (BR Act). This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the BR Act.

The statutory inspection of the bank was conducted by National Bank for Agriculture and Rural Development (NABARD) with reference to its financial position as on March 31, 2025. Based on supervisory findings of contravention of statutory provisions and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said provisions. After considering the bank’s reply to the notice and oral submissions made during the personal hearing, RBI found, inter alia, that the following charge against the bank was sustained, warranting imposition of monetary penalty:

The bank had sanctioned director related loans.

This action is based on deficiencies in statutory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers. Further, imposition of this monetary penalty is without prejudice to any other action that may be initiated by RBI against the bank.

(Brij Raj)
Chief General Manager

Press Release: 2025-2026/2311 | | The Reserve Bank of India (RBI) has, by an order dated March 20, 2026, imposed a monetary penalty of ₹1 lakh (Rupees One Lakh only) on The Kodagu District Co-operative Central Bank Limited, Karnataka (the bank) for contravention of provisions of Section 20 read with Section 56 of the Banking Regulation Act, 1949 (BR Act). This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the BR Act.

The statutory inspection of the bank was conducted by National Bank for Agriculture and Rural Development (NABARD) with reference to its financial position as on March 31, 2025. Based on supervisory findings of contravention of statutory provisions and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said provisions. After considering the bank’s reply to the notice and oral submissions made during the personal hearing, RBI found, inter alia, that the following charge against the bank was sustained, warranting imposition of monetary penalty:

The bank had sanctioned director related loans.

This action is based on deficiencies in statutory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers. Further, imposition of this monetary penalty is without prejudice to any other action that may be initiated by RBI against the bank.

(Brij Raj)
Chief General Manager

Press Release: 2025-2026/2311 |
| The Reserve Bank of India (RBI) has, by an order dated March 20, 2026, imposed a monetary penalty of ₹1 lakh (Rupees One Lakh only) on The Kodagu District Co-operative Central Bank Limited, Karnataka (the bank) for contravention of provisions of Section 20 read with Section 56 of the Banking Regulation Act, 1949 (BR Act). This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 56 of the BR Act.

The statutory inspection of the bank was conducted by National Bank for Agriculture and Rural Development (NABARD) with reference to its financial position as on March 31, 2025. Based on supervisory findings of contravention of statutory provisions and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said provisions. After considering the bank’s reply to the notice and oral submissions made during the personal hearing, RBI found, inter alia, that the following charge against the bank was sustained, warranting imposition of monetary penalty:

The bank had sanctioned director related loans.

This action is based on deficiencies in statutory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers. Further, imposition of this monetary penalty is without prejudice to any other action that may be initiated by RBI against the bank.

(Brij Raj)
Chief General Manager

Press Release: 2025-2026/2311 | |