The Reserve Bank of India has imposed a monetary penalty of ₹1 lakh on The Modern Co-operative Bank Limited, Chalisgaon, Maharashtra, for non-compliance with certain regulatory directions.
The penalty order was dated June 23, 2026. RBI announced the action in a press release published on June 25, 2026. The release was issued by Brij Raj, Chief General Manager, and carried the reference number 2026-2027/543.
According to the central bank, the action relates to directions on “Exposure Norms and Statutory / Other Restrictions – UCBs” and “Know Your Customer (KYC)”. UCBs refers to urban co-operative banks, a category of co-operative banks regulated by RBI for banking compliance. KYC directions require banks to maintain and submit customer identification records as prescribed by the regulator.
The penalty was imposed under powers available to RBI under Section 47A(1)(c), read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949. These provisions allow RBI to impose monetary penalties on regulated banks for specified compliance failures.
What RBI found during inspection
RBI said it had carried out a statutory inspection of the bank with reference to its financial position as on March 31, 2025. A statutory inspection is a supervisory review conducted by the regulator to check a bank’s position and compliance with applicable banking directions.
Based on supervisory findings from that inspection and related correspondence, the regulator issued a notice to the bank. The notice asked the bank to show cause why a penalty should not be imposed for failure to comply with the cited RBI directions.
RBI said it considered the bank’s reply to the notice. After that review, the regulator concluded that certain charges of non-compliance were sustained and warranted imposition of a monetary penalty.
The RBI release listed two main findings:
- The bank had breached the prescribed regulatory limit for single borrower exposure.
- The bank had failed to upload customers’ KYC records to the Central KYC Records Registry within the prescribed timeline.
A single borrower exposure limit is a regulatory ceiling on how much exposure a bank may have to one borrower. Such limits are meant to reduce concentration risk by preventing a bank from having excessive exposure to a single customer or borrower group.
The Central KYC Records Registry, or CKYCR, is the registry referred to in RBI’s release for customer KYC records. RBI’s finding was that the bank did not upload the relevant KYC records within the time allowed under the applicable directions. The press release did not provide details on the number of customer records involved, the size of the exposure breach, or the length of the upload delay.
Penalty linked to compliance, not customer transactions
RBI stated that the penalty is based on deficiencies in regulatory compliance. It clarified that the action is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.
This means the penalty concerns the bank’s compliance with RBI directions, rather than a finding that customer transactions themselves are invalid. RBI also said the monetary penalty is without prejudice to any other action that may be initiated against the bank.
In practical terms, the current penalty does not prevent RBI from taking separate action, if required, under applicable law or regulatory directions. The release did not mention any immediate restriction on the bank’s ordinary banking operations.
Source: Reserve Bank of India Press Releases.