The Reserve Bank of India imposed a monetary penalty of ₹1,63,60,000—equivalent to ₹1.636 crore—on Canara Bank under an order dated 7 January 2025, following a Statutory Inspection for Supervisory Evaluation that identified regulatory deficiencies across three distinct areas. The violations concerned non-compliance with the RBI's directions on Priority Sector Lending targets and classification, the Interest Rate on Deposits framework, and the norms governing Basic Savings Bank Deposit Accounts under the central bank's financial inclusion directives. Canara Bank is a public sector commercial bank.
THREE AREAS OF REGULATORY NON-COMPLIANCE
The first area of non-compliance concerns the RBI's priority sector lending directions. RBI rules require scheduled commercial banks to deploy a defined proportion of their adjusted net bank credit into designated priority sector categories, including agriculture, micro and small enterprises, export credit, education, housing, and social infrastructure. The RBI found that Canara Bank had collected loan-related charges on certain priority sector loans of up to ₹25,000, which the directions do not permit.
The second and third areas of non-compliance relate to the bank's administration of retail deposit products. Under the Interest Rate on Deposits directions, the RBI found that the bank did not pay any interest on certain savings bank deposit accounts. Under the BSBDA directions, the RBI found that the bank simultaneously maintained savings bank deposit accounts and Basic Savings Bank Deposit accounts—no-frills financial inclusion products—for the same customers, contrary to the restrictions the RBI places on such dual-account arrangements.
ENFORCEMENT ORDER AND CUSTOMER TRANSACTION VALIDITY
The RBI said the action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.