The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs 2 lakh on The Pragathi Co-operative Bank Ltd, Karnataka, for violating certain provisions of the Banking Regulation Act, 1949, and failing to comply with multiple regulatory directions applicable to urban co-operative banks.

The penalty, imposed through an order dated August 20, 2026, relates to norms governing loans and advances to directors and related entities, exposure limits, and the classification, valuation and operation of investment portfolios.

The action followed an RBI statutory inspection of the bank’s financial position as of March 31, 2025. After reviewing the bank’s response to the regulatory notice and submissions made during a personal hearing, the RBI found three key compliance lapses.

The bank was found to have sanctioned loans linked to directors, exceeded the prescribed single-borrower exposure limit, and breached the prudential limits for gross inter-bank exposure and inter-bank counterparty exposure.

RBI clarified that the penalty is related to statutory and regulatory compliance deficiencies and does not comment on the validity of transactions or agreements entered into by the bank with its customers. The penalty is also without prejudice to any further action that may be initiated by the central bank.