Home › Circulars › https://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=63040

RBI fines Sri Bharathi Co-operative Urban Bank ₹1.5 lakh for director loan, small-value loan rule breaches

Co-operative Banks
Current & verified — this is the latest version
Most relevant forBranch Manager — Private Bank / SFBBranch Manager — PSU / Co-op / RRB (sanctioning powers)RCU / Fraud Control UnitLegal / Documentation & Recovery-LegalCompliance TeamInternal Audit
🛠 Banker’s toolkit — checklists & reply templates →
⏱ ~1 min read
📄 Source: Reserve Bank of India · Press Release prid 63040
Quick answerRBI imposed a ₹1.5 lakh penalty on Sri Bharathi Co-operative Urban Bank for sanctioning loans to directors and failing to maintain small-value loans at 40% of total advances as of March 31, 2025.

What changed

RBI issued a penalty order on June 25, 2026, against the bank for non-compliance with directions on director-related loans and small-value loan norms. The action followed a statutory inspection as of March 31, 2025, which revealed sustained violations.

What it means for you

Banks must strictly adhere to RBI's restrictions on loans to directors and their related entities. The 40% small-value loan threshold for UCBs is a binding requirement; falling short invites monetary penalties. This reinforces RBI's zero-tolerance for regulatory non-compliance.

The rule, in the simplest words
  • Banks cannot give loans to their own directors or to businesses owned by directors.
  • Small loans (loans of small amounts) must be at least 40% of all loans the bank gives.
  • If a bank breaks these rules, RBI (the central bank) can fine it money.
  • The bank must check its loans regularly to make sure it follows the rules.
How it plays out — a real example

A gold-loan officer in Indore reviews the bank's loan list before the March 31 report. She notices a loan given to a director's relative and another where small loans are only 35% of total advances. She flags both issues to the compliance team, who then work to fix them before the RBI inspection, avoiding a penalty like the one on Sri Bharathi Co-operative Urban Bank.

What you must do

Who it affects

Sri Bharathi Co-operative Urban Bank Limited, Hyderabad, All Primary (Urban) Co-operative Banks (UCBs), Compliance officers and internal audit teams of UCBs

What is the small-value loan requirement for UCBs?

UCBs must ensure that small-value loans constitute at least 40% of their aggregate loans and advances as on March 31, 2025.

Test yourself

Quick self-check built only from the facts already on this page — tap a question to reveal the answer.

Q1. In one line, what does this circular do?

RBI imposed a ₹1.5 lakh penalty on Sri Bharathi Co-operative Urban Bank for sanctioning loans to directors and failing to maintain small-value loans at 40% of total advances as of March 31, 2025.

Q2. Who does this circular apply to?

Sri Bharathi Co-operative Urban Bank Limited, Hyderabad, All Primary (Urban) Co-operative Banks (UCBs), Compliance officers and internal audit teams of UCBs

Q3. What is the first thing you should do about it?

Review all loan sanctions to ensure no director-related loans are extended without explicit RBI approval.

Key dataSee the live numbers behind this topic: RBI Penalty Tracker, NPA / Asset-Quality Tracker — updated from official RBI data.
Key termsPlain-English definitions of terms in this circular — see the full Indian banking glossary. KYC / AML · Gross NPA (GNPA) · Deposit insurance (DICGC) · Scheduled Commercial Bank (SCB)
Related circulars · Enforcement
RBI fines Chikmagalur Co-op Bank for director-related loansRBI fines Citizens Urban Co-op Bank ₹5 lakh for exposure and cyber lapsesRBI fines Lalgudi Co-op Urban Bank for capital adequacy lapsesRBI fines Modern Co-op Bank for exposure and KYC lapsesRBI Penalty on Nabapalli Cooperative Bank for KYC Lapses
Browse all departments →

💬 Banker Discussion

Discuss this circular with fellow bankers. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.

Loading comments…
Who does what — compliance checklist
💰 Credit
  • Review all loan sanctions to ensure no director-related loans are extended without explicit RBI approval.
📜 Compliance
  • Monitor small-value loan portfolio composition to meet the 40% minimum threshold at all reporting dates.
  • Strengthen internal audit and compliance checks to catch such breaches before statutory inspections.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template

Example: if you are a Credit Manager at a bank this circular applies to (Sri Bharathi Co-operative Urban Bank Limited, Hyderabad, All Primary (Urban) Co-operative Banks (UCBs), Compliance officers and internal audit teams of UCBs), your first concrete step on “RBI fines Sri Bharathi Co-operative Urban Bank ₹1.5 lakh for director loan, small-value loan rule breaches” is: “Review all loan sanctions to ensure no director-related loans are extended without explicit RBI approval.”.

  1. Circular: https://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=63040 -- RBI fines Sri Bharathi Co-operative Urban Bank ₹1.5 lakh for director loan, small-value loan rule breaches
  2. Issued: 29 Jun 2026, 17:38 IST
  3. Action required: Review all loan sanctions to ensure no director-related loans are extended without explicit RBI approval.
  4. Action required: Monitor small-value loan portfolio composition to meet the 40% minimum threshold at all reporting dates.
  5. Action required: Strengthen internal audit and compliance checks to catch such breaches before statutory inspections.
  6. Owner: ____________ Target date: ____________
  7. Board/committee approval needed? Y / N
  8. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
AI-drafted · AI fact-check pending · under the editorial review of our expert review panel · decoded & published by BankPulse · 29 Jun 2026, 17:38 IST
Official RBI source: https://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=63040 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert review panel. Independent platform, not affiliated with the Reserve Bank of India; never reproduces RBI text verbatim.
Public beta — plain-English informational summaries. Always verify against the official RBI source (circular number cited on every page) before making compliance, credit, treasury, audit, or operational decisions. · Join our WhatsApp channel ↗
—