Regulatory Failure: RBI Imposes Monetary Penalty on Canara Bank over Critical KYC and Inoperative Account Non-Compliance
Reserve Bank of India Slaps ₹41.80 Lakh Fine on Canara Bank
The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹41.80 lakh on Canara Bank. The penalty, ordered on June 5, 2026, targets the bank's non-compliance with specific provisions set out in RBI directions regarding Know Your Customer (KYC).The action comes following findings from a Statutory Inspection for Supervisory Evaluation (ISE 2025) conducted by the central bank. This evaluation reviewed the bank’s financial position as of March 31, 2025.
Understanding the Compliance Violations
The penalty is levied under the powers conferred upon the RBI through Section 47A(1)(c), read with sections 46(4)(i) and 51(1) of the Banking Regulation Act, 1949. The regulatory action stems from deficiencies identified in critical compliance areas mandated by the RBI.Specifically, two primary charges against Canara Bank were sustained after considering its response to a show-cause notice. These relate directly to the proper maintenance and classification of customer records.
KYC Record Failures and Account Classification Errors
One major lapse involved the failure of the bank to upload KYC records for certain customers onto the Central KYC Records Registry (CKYCR). This omission occurred despite regulatory timelines being in place for such data submission.Furthermore, RBI found that the bank classified certain customer accounts as inoperative. This classification was premature, as the last customer induced transaction in those specific accounts was still less than one year old.
Scope of the Penalty and Regulatory Stance
The penalty imposed by the RBI is purely based on deficiencies identified in regulatory compliance. The central regulator has stressed that this action is not intended to question the validity of any transactions or agreements entered into between Canara Bank and its customers.It is important to note that the imposition of the monetary penalty does not preclude the RBI from initiating any other subsequent action against the bank, as permitted under banking regulations.
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