RBI Imposes Fines on Canara, BOI, and J&K Bank for Non-Compliance

The Reserve Bank of India (RBI) has recently imposed fines on Canara Bank, Bank of India, and Jammu & Kashmir Bank for various regulatory compliance issues.

Canara Bank Fined for Multiple Violations

On May 12, 2023, RBI imposed ₹2.92 crore of multiple fines on Canara Bank for several infractions, which included:

• Failure to link interest rates on floating rate retail loans and loans to Micro, Small, and Medium Enterprises (MSMEs) to an external benchmark.
• Opening savings accounts for ineligible entities.
• Registering invalid mobile numbers for multiple credit card accounts.
• Not paying interest on deposits withdrawn prematurely under the daily deposit scheme within 24 months of account opening.
• Charging SMS alert fees to customers not based on actual usage.
• Failing to conduct proper ongoing customer due diligence and not using robust software to generate alerts for transactions inconsistent with customer profiles.

These violations were discovered during a statutory inspection and subsequent review by the RBI.

Jammu & Kashmir Bank Penalized for Data and Loan Irregularities

On June 23, 2023, RBI fined Jammu & Kashmir Bank ₹2.5 crore for:

• Not ensuring the accuracy and quality of data submitted to the Central Repository of Information on Large Credits (CRILC).
• Extending term loans to a corporation without conducting adequate due diligence on the project’s viability and bankability.
• Creating financial and non-financial messages in the SWIFT system without ensuring that the underlying transactions were reflected in the Core Banking System (CBS).

These issues were identified during the bank's Statutory Inspection for Supervisory Evaluation, which was conducted on March 31, 2021.

Additional Penalties for Bank of India and Canara Bank

In another separate action, the RBI fined Bank of India ₹1 crore and Canara Bank ₹1.63 crore for failing to comply with certain regulatory provisions. The exact details of these violations were not specified.

Context and Impact

These penalties highlight the RBI’s continued focus on enforcing regulatory compliance within the banking sector. In recent years, the central bank has ramped up scrutiny, imposing fines on Canara with various financial institutions for infractions related to KYC norms, regulatory non-compliance, and cybersecurity lapses.

The actions against Canara Bank, Bank of India, and Jammu & Kashmir Bank emphasize the importance of adhering to regulatory guidelines to ensure the integrity and stability of the financial system.