RBI Fines Jammu And Kashmir Bank Rs 99.3 Lakh For Compliance Lapses

The Reserve Bank of India (RBI) has imposed a fine of Rs 99.30 lakh on Jammu and Kashmir Bank for failing to comply with the directions regarding grievance handling, customer communication, KYC verification, and the transfer of unclaimed deposits. The fines have been imposed based on the statutory inspection of the bank's financial position as of March 2024, conducted for supervisory evaluation purposes.

A notice for explanation was issued after communicating the inspection. RBI considered the bank's written responses, additional submissions, and the oral statements made during the personal hearing. The order pointed out that such lapses related to basic requirements required should be followed by banks at all times to ensure consistent treatment of customers and correct compliance with regulatory prescriptions.

Findings From The Inspection

RBI has pointed out in the order that certain complaints, which are partly or fully rejected by the internal mechanism of the bank, have not been escalated to the Internal Ombudsman. In cases where such complaints skip this final check, customers are denied an internal check intended to assure fairness in those very cases where the first response might have missed something important.

The order also mentioned that no final resolution letters were sent to the customers by the bank after closing complaints. These letters are meant to serve the dual purpose of informing the customers about the decision taken and informing them in writing that they may approach the Banking Ombudsman in case they are not satisfied. In the absence of such communication, customers remain ignorant about the course of action they need to take, and the grievance redressal process lacks transparency.

The inspection also highlighted the bank's gaps in video-based customer identification. It was not using face-verification technology, although this is an essential element for digital verification. The bank was also not verifying customers' financial information furnished at the time of onboarding. These checks are expected to prevent impersonation, ensure correct profiling, and reduce the risk of the account being misused.

The other factor highlighted by the RBI was the delay in the transfer of eligible unclaimed deposits to the Depositor Education and Awareness Fund. Since such transfers are time-bound, they are monitored so that the dormant balances are appropriately accounted for. When transfers are delayed, unclaimed balances remain on the books of a bank beyond what is tolerable, and this impacts reconciliation and compliance.

Scope Of The Action

RBI added that the penalty is confined to these non-compliances and does not affect customer transactions or agreements. The central bank also clarified that the order does not preclude additional supervisory action if subsequent reviews throw up more vulnerabilities. Regulators make such points so that fines are seen in their particular context rather than as a comment about the broader financial health of an institution.