The Reserve Bank of India has imposed a monetary penalty of Rs 1 lakh on The Shimoga District Co-operative Central Bank Ltd. for contravening provisions of Section 20 read with Section 56 of the Banking Regulation Act, 1949.

The action follows a statutory inspection conducted by National Bank for Agriculture and Rural Development based on the bank's financial position as of March 31, 2025. Following supervisory findings and subsequent correspondence, RBI issued a show-cause notice to the bank seeking an explanation for the violations.

After reviewing the bank's response and oral submissions during a personal hearing, RBI found that the bank had sanctioned and renewed loans related to its directors, in violation of statutory provisions. Consequently, the central bank imposed the monetary penalty under the powers vested in it by the Banking Regulation Act.

RBI clarified that the penalty is based on deficiencies in statutory compliance and does not affect the validity of any transactions or agreements between the bank and its customers. The action is also without prejudice to any further regulatory measures that may be initiated against the bank.