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The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹41.80 lakh on major public sector bank Canara Bank. The central bank has taken this action due to the bank not following the customer identification (Know Your Customer-KYC) standards and regulatory instructions to inoperative accounts.

RBI said in a statement issued on Friday that this action has been taken after the Statutory Inspection for Supervisory Evaluation – ISE 2025 conducted for the financial year 2024-25 of the bank. During the inspection, the financial position and regulatory compliance of the bank as on March 31, 2025 was reviewed.

What flaws did RBI find?

During the inspection, the Reserve Bank found that Canara Bank did not upload the KYC information of some customers on the Central KYC Records Registry (CKYCR) within the prescribed time limit. Banking regulations require KYC information of customers to be entered into the central record system in a timely manner to ensure transparency and monitoring of financial transactions.

Apart from this, RBI also found that the bank had put some accounts in the inoperative category, even though the last transaction initiated by the customers in those accounts was less than a year ago. As per the rules, such accounts should not have been declared inactive.

Action taken after notice

After these irregularities came to light, RBI had issued a show cause notice to Canara Bank. In the notice, the bank was asked why punitive action should not be taken against it for violation of regulatory instructions.

In response, Canara Bank submitted a written explanation and also presented its views during the personal hearing. However, after reviewing the bank’s arguments and available records, RBI came to the conclusion that there has been a violation of norms and imposition of financial penalty is appropriate in this case.

Action under Banking Regulation Act

The Reserve Bank clarified that this penalty has been imposed in exercise of the powers obtained under the Banking Regulation Act, 1949. The central bank said that this action relates only to the deficiencies observed in regulatory compliance and does not affect the validity of any transaction or agreement entered into between the bank and its customers.

Further action may be taken

RBI also said in its statement that the imposition of monetary penalty does not mean that other regulatory steps will not be taken against the bank if necessary in future. The central bank clarified that it inspects banks from time to time to ensure compliance with banking rules, protection of customer interests and stability of the financial system.

Experts believe that rules to KYC and account operations are very important for the transparency and security of the banking system. In such a situation, RBI has been continuously adopting a strict stance on any kind of negligence in following the regulatory standards. This fine imposed on Canara Bank is also being considered as a part of this monitoring and compliance system.

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