RBI imposes ₹41.8 lakh penalty on Canara Bank:Violations found in KYC compliance and account handling

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹41.8 lakh on Canara Bank for non-compliance with certain regulatory directions, including Know Your Customer (KYC) norms and rules governing inoperative accounts. What were the issues? According to the RBI, an inspection revealed that the bank had failed to upload the KYC records of several customers to the Central KYC Records Registry (CKYCR) within the prescribed timeline. Banks are required to update KYC details of new and existing customers on the central registry to strengthen fraud prevention measures. The central bank also found irregularities in the classification of customer accounts. As per RBI guidelines, accounts in which customers have carried out transactions during the preceding one year should be treated as active. However, Canara Bank had classified several such accounts as ‘inoperative’ even though a year had not elapsed since the last transaction. RBI’s show-cause notice to the bank The deficiencies came to light during the Supervisory Evaluation for 2025, based on an assessment of the bank’s financial position and operations as of March 31, 2025. Following the inspection, RBI issued a show-cause notice to the bank. After considering Canara Bank’s written response and oral submissions, the central bank decided to impose the penalty. RBI clarified that the action relates solely to shortcomings in regulatory compliance and does not question the validity of any transactions or agreements between the bank and its customers. It added that the penalty will have no impact on the bank’s normal operations or on depositors’ funds.