RBI imposed a penalty on Canara Bank for violations related to KYC and inactive accounts

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RBI imposed a penalty on Canara Bank

Highlights

On June 5, 2026, RBI imposed a monetary penalty on Canara Bank for violations related to KYC and regulations concerning inactive accounts.
During the Statutory Inspection for Supervisory Evaluation, ISE 2025, it was found that the bank did not upload KYC records to CKYCR within the prescribed timeframe and incorrectly classified some active accounts as inactive.
RBI clarified that this action is based solely on compliance deficiencies and that additional measures may be taken in the future if necessary.

This article was translated from the original. Read the original version by our correspondent here.

Basis of Penalty and Regulatory Findings

According to the press release dated June 5, 2026, from the Reserve Bank of India, this penalty was imposed for non-compliance with certain provisions of the ‘Know Your Customer’ and ‘Unclaimed Deposits / Inoperative Accounts in banks’ guidelines. The central bank took this action under the powers conferred by Section 47A(1)(c), Section 46(4)(i), and Section 51(1) of the Banking Regulation Act, 1949.

RBI stated that the bank’s Statutory Inspection for Supervisory Evaluation, ISE 2025, was conducted with reference to its financial position as of March 31, 2025. Based on supervisory findings, a show cause notice was issued to the bank, after which the bank’s response, additional submissions, and oral arguments presented during the personal hearing were considered.

The central bank found that Canara Bank did not upload certain customers’ KYC records to the Central KYC Records Registry, CKYCR, within the prescribed timeline. Additionally, the bank classified some accounts as inoperative even though the last customer-induced transaction in those accounts was less than one year old.

Impact on Banking Compliance

RBI clarified that this action is based on regulatory compliance deficiencies and is not intended to pronounce upon the validity of any transaction or agreement between the bank and its customers. The central bank also stated that the monetary penalty does not preclude further action, and additional steps may be taken if necessary.

This case underscores that KYC record management and proper classification of inoperative accounts remain key areas of compliance in the Indian banking sector. Such actions increase pressure on banks to strengthen internal controls, update records, and adhere to regulatory timelines.

In our previous article, it was mentioned in the context of the June monetary policy review of RBI that rising crude oil prices, rupee weakness, and monsoon-related concerns were affecting market sentiment ahead of the policy decision. That report also highlighted that investors’ focus would not be limited to the repo rate, but would also remain on inflation, growth, liquidity, and forward guidance, as these indicators could determine the near-term direction of bonds, currency, and equities.

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