The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹41.8 lakh on Canara Bank for failing to comply with certain regulatory requirements related to Know Your Customer (KYC) norms and the handling of inactive customer accounts. The action follows findings made during the central bank's supervisory assessment for 2025.

According to RBI, the shortcomings were identified after examining the financial position and operational practices of the bank as of March 31, 2025. Based on the inspection findings, the central bank issued a show-cause notice to Canara Bank. After reviewing the bank's written submissions and oral explanations, RBI decided to levy the penalty.

The central bank stated that the penalty pertains only to deficiencies in regulatory compliance and does not affect the validity of any customer transactions or agreements. Depositors and account holders will not face any impact on their funds or regular banking services.

KYC Compliance Issues

During the inspection, RBI found that Canara Bank had failed to upload the Know Your Customer records of several customers to the Central KYC Records Registry (CKYCR) within the prescribed timeline.

Under RBI guidelines, banks are required to upload KYC details of new and existing customers to the central repository to strengthen transparency and reduce the risk of fraud and identity-related financial crimes. Delays in updating these records were considered a violation of regulatory instructions.

Irregularities in Account Classification

The central bank also observed discrepancies in the classification of certain customer accounts.

As per RBI regulations, accounts that have witnessed customer transactions during the preceding one year should be treated as active. However, Canara Bank had categorized some such accounts as 'inoperative' despite the fact that one year had not elapsed since the last customer-initiated transaction.

According to officials, proper classification of accounts is essential to ensure uninterrupted banking services and compliance with customer protection norms.

Regulatory Action

RBI clarified that the monetary penalty has been imposed under the provisions of the Banking Regulation Act after due consideration of the facts and responses provided by the bank.

Officials emphasized that the action is aimed at ensuring adherence to regulatory standards and strengthening governance mechanisms within the banking system. The central bank also reiterated that the penalty should not be interpreted as a reflection on the financial soundness of Canara Bank.