Summary of this article
RBI penalises three banks for multiple regulatory compliance failures
Union Bank faces highest penalty for customer service lapses
Violations include KYC gaps, lending norms, deposit interest issues
The Reserve Bank of India (RBI) has issued a cumulative fine of Rs 2.17 crore against three public sector banks for non-compliance with various regulatory requirements, which were detected during supervisor inspections.
The penalties, announced on March 27, 2026, come after inspections conducted with reference to the financial position of the banks as on March 31, 2025. The action was taken under the provisions of the Banking Regulation Act, 1949.
Union Bank Of India Fined Maximum Penalty
RBI imposed the maximum penalty of Rs 95.40 lakh on the Union Bank Of India, for non-compliance of directions relating to customer protection in unauthorised electronic transactions and system-based asset classification.
As per RBI, the bank failed to credit the amount involved in unauthorised transactions to certain customers' accounts within 10 working days of notification. This requirement is a part of the framework intended to limit customer liability in the case of digital fraud.
The bank was also found to have not provided round-the-clock access for customers to report unauthorised transactions through multiple channels. In addition, RBI has also observed instances of manual intervention in the system-based asset classification in certain Kisan Credit Card accounts.
Bank Of India Penalised For Loan And Deposit Malpractices
A penalty of Rs 58.50 lakh was imposed on the Bank of India for violations regarding priority sector lending and deposit interest norms.
RBI found out that the bank had imposed ad hoc charges, such as service, inspection and processing fees in certain priority sector loan accounts with sanctioned amounts up to Rs 25,000. Such charges are not allowed under existing guidelines for small-ticket loans.
Further, the bank did not pay interest on some term deposit receipts between the maturity and repayment of loans. This is contrary to RBI guidelines under which banks are supposed to compensate depositors for delays in repayment after maturity.
Central Bank Of India Pulled Up For KYC And Basic Accounts
RBI penalised the Central Bank of India Rs 63.60 lakh for lapses in Know Your Customer (KYC) compliance and basic savings account norms.
The inspection found that the bank had not uploaded KYC records of some customers on the Central KYC Records Registry (CKYCR) within the prescribed time. Timely uploading of KYC data, so that uniformity and duplication in the banking system can be reduced.
Additionally, the bank was found to have opened multiple Basic Savings Bank Deposit Accounts (BSBDAs) for some customers, whereas rules say that a person may only have one account.
Action Based On Supervisory Findings
In all three cases, RBI issued show-cause notices to the banks after detecting the non-compliance during inspections. The banks sent written responses, and oral submissions were made in personal hearings before the penalties were finalised.
The central bank mentioned that the penalties are based on a lack of compliance with statutes and regulations. It also said that the action does not call into question the validity of any transactions or agreements executed by the banks with their customers.
RBI added that the penalties are without prejudice to any further action that may be initiated against the banks.
Focus On Compliance And Protecting Customers
The penalties, on the other hand, indicate a step towards improving compliance standards among banks in areas such as digital transaction safety, protection of small borrowings, servicing of deposits and KYC processes.
These areas have been subject to more regulatory focus in recent years as banking services have gone more digital and as there has been a growing expansion of customer-facing operations.
