The Reserve Bank of India (RBI), through an order dated August 5, 2025, has imposed a monetary penalty of ?16 lakh on Andaman & Nicobar State Co-operative Bank Limited for violating provisions of Section 26A read with Section 56 of the Banking Regulation Act, 1949, and for non-compliance with RBI's directions on Know Your Customer (KYC) norms.

The penalty was imposed under the powers vested in the RBI by Section 47A(1)(c), read with Sections 46(4)(i) and 56 of the Act.

A statutory inspection of the bank, conducted by NABARD based on its financial position as of March 31, 2024, revealed contraventions of statutory provisions and non-compliance with regulatory directions. Following the findings, RBI issued a show-cause notice to the bank asking why a penalty should not be levied. After reviewing the bank’s written response and oral submissions during the personal hearing, RBI concluded that the charges were substantiated.

Specifically, the bank was found to have:

Failed to transfer eligible unclaimed amounts to the Depositor Education and Awareness Fund (DEAF) within the stipulated timeframe.

Failed to conduct periodic reviews of risk categorisation of customer accounts at intervals of at least six months.

RBI clarified that the penalty was imposed due to shortcomings in regulatory compliance and does not affect the validity of any transactions or agreements made by the bank with its customers. The central bank also noted that this action is without prejudice to any further regulatory measures it may initiate against the bank.