Canara Bank ₹41.80 Lakh RBI Penalty: KYC and Account Lapses
Why in the news
The central bank penalised a large public sector lender after an inspection exposed gaps in customer verification records and in how dormant accounts were tagged.
Key facts
| Item | Detail |
|---|---|
| Penalty | ₹41.80 lakh |
| Bank | Canara Bank (public sector) |
| Provisions | Banking Regulation Act, 1949: Section 47A(1)(c), together with Sections 46(4)(i) and 51(1) |
| Inspection | Statutory Inspection for Supervisory Evaluation (ISE 2025), position as on 31 March 2025 |
| Lapse 1 | KYC records of several customers not uploaded to the CKYCR in time |
| Lapse 2 | Some accounts called inoperative although the last customer-initiated transaction was under a year old |
Background concepts
- Banking Regulation Act, 1949: the main banking law; lets RBI regulate, supervise and inspect banks, and covers licensing, capital, governance, audit and penalties. RBI levies fines through Section 47A.
- ISE: routine on-site RBI inspection reviewing operations, governance, risk management and compliance on a reference date; feeds supervisory ratings and enforcement.
- KYC: identity and address verification, required under the PMLA, 2002 and RBI rules; meant to curb money laundering, terror financing and identity fraud.
- CKYCR: a central KYC database kept by CERSAI; banks, NBFCs, insurers and mutual funds must upload records on time; one CKYC number works across institutions.
- Inoperative account: a savings or current account with no customer-induced transaction for over 2 years; bank-credited interest or charges do not count. Banks review accounts yearly.
Concerns
- Wrong inoperative tagging can inconvenience customers and cause wrongful freezing.
- RBI also uses Section 47A against banks, NBFCs and co-operative banks for KYC/AML, cyber, lending and customer-service lapses.
About Canara Bank
- Headquarters: Bengaluru; founded 1906 at Mangaluru by Ammembal Subba Rao Pai; nationalised 1969.
- Syndicate Bank was merged into it in the 2020 merger.
Exam angle
- Law: Banking Regulation Act, 1949 (RBI itself was set up under the RBI Act, 1934).
- CKYCR is maintained by CERSAI.
- Inoperative threshold: more than 2 years without customer-induced transaction.