The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs 2.50 lakh on The Arakonam Co-operative Urban Bank Limited, Tamil Nadu, for contravention of provisions of the Banking Regulation Act, 1949 and non-compliance with RBI directions on exposure norms, management of advances and Know Your Customer (KYC) requirements.

The penalty was imposed through an order dated December 15, 2025, under powers conferred by Section 47A of the Banking Regulation Act read with Sections 46 and 56.

RBI said the action followed a statutory inspection of the bank conducted with reference to its financial position as on March 31, 2025. Based on supervisory findings, a show-cause notice was issued to the bank and, after considering its written and oral submissions, the central bank found multiple compliance lapses.

The bank failed to transfer 20 per cent of its net profit to the Statutory Reserve for FY2022-23, FY2023-24 and FY2024-25, sanctioned loans in excess of prescribed regulatory limits to certain nominal members, extended gold loans under bullet repayment schemes beyond permissible limits, opened accounts that were non-compliant with KYC norms, and failed to upload customer KYC records to the Central KYC Records Registry within stipulated timelines.

RBI clarified that the penalty is based on deficiencies in regulatory compliance and does not reflect on the validity of any transactions or agreements entered into by the bank with its customers. The action is without prejudice to any further measures that RBI may initiate.