Dry roast peanuts in a pan on a medium flame until golden brown. Remove and let it cool down. You can also roast the peanuts in the air fryer.
In the same pan, heat oil, add cumin (jeera) seeds, split urad dal and saute until the dal turns light brown.
Add onion/shallots, garlic, dried red chilies and saute until the onions turn soft and light brown. It roughly takes 2-3 minutes. Turn off the heat and cool completely.
In a blender jar, add roasted peanuts, sautéed onion-garlic mixture, tamarind, salt, water, and blend to a course or smooth paste as per your preference.
Heat coconut oil in a small pan, add mustard seeds, urad dal, dry red chili, curry leaves, and hing, and saute for a few seconds until the dal turns light brown.
Transfer to a bowl, add the prepared tempering.
Serve groundnut chutney with Idli, dosa, paniyaram, roti, or as a spread in sandwiches and Enjoy.