Document title: RBI imposes monetary penalty on The Pragathi Co-operative Bank Limited, Karnataka
Issuing authority: Reserve Bank of India (RBI)
Date of release: 24 August 2026 (order dated 20 August 2026)
Banking and Credit
The RBI’s inspection, referencing the bank’s financial position as of 31 March 2025, found that The Pragathi Co‑operative Bank Limited had sanctioned loans to its directors, thereby violating the provisions of section 20 read with section 56 of the Banking Regulation Act, 1949. The bank also breached the prescribed regulatory limit for single‑borrower exposure and exceeded both the prudential inter‑bank (gross) exposure limit and the inter‑bank counter‑party exposure limit.
Regulatory and Policy Measures
Pursuant to section 47A(1)(c) read with sections 46(4)(i) and 56 of the Banking Regulation Act, the RBI issued a notice to the bank asking it to show cause why a penalty should not be imposed for non‑compliance with RBI directions on loans and advances to directors, exposure norms for urban cooperative banks, and the classification, valuation and operation of investment portfolios of primary urban cooperative banks. After considering the bank’s written reply and oral submissions made during a personal hearing, the RBI sustained the charges and imposed a monetary penalty of ₹2 lakh (Rupees Two Lakh only). The penalty is imposed without prejudice to any further action the RBI may take against the bank.
The RBI’s action underscores its commitment to enforce statutory and regulatory compliance among urban cooperative banks, emphasizing adherence to exposure limits and the prohibition of director‑related lending.