RBI Imposes ₹2 Lakh Penalty on Pandharpur Urban Co-operative Bank

The penalty was imposed under the powers vested in the RBI by Section 47A(1)(c) of the Banking Regulation Act, 1949. A statutory inspection conducted as of March 31, 2025, revealed that the bank engaged in 'evergreening' of loans. By providing new credit to borrowers whose accounts were already classified as NPAs, the bank attempted to artificially maintain the health of its loan portfolio, thereby misleading stakeholders about its true financial position.

This enforcement action highlights the RBI's stringent stance on NPA management within the co-operative banking sector. Urban Co-operative Banks (UCBs) often face scrutiny for governance lapses and inadequate asset classification. By penalising such practices, the regulator aims to protect depositor interests and ensure the stability of the financial system. The action is purely regulatory and does not impact the validity of individual transactions between the bank and its customers, but serves as a corrective signal to the management.

• Penalty Amount: ₹2 lakh
• Violation: NPA asset classification rules
• Practice Found: Sanctioning credit to repay non-performing loans
• Statutory Basis: Banking Regulation Act, 1949

Glossary

NPA: Non-Performing Asset, a loan or advance for which the principal or interest payment remained overdue for a period of 90 days or more.

Evergreening: A practice where a bank provides fresh loans to a struggling borrower to help them pay off old debts, hiding the true extent of bad loans.