The Reserve Bank of India imposed monetary penalties totalling ₹2.18 crore on three public sector lenders by orders dated 23 March 2026, announced on 27 March, citing deficiencies identified during supervisory inspections of the banks' financial positions as at 31 March 2025. The penalties covered failures relating to unauthorised electronic banking transactions, asset classification, priority sector lending, interest on deposits, know-your-customer rules and basic savings bank deposit accounts.
Union Bank of India received the largest single penalty of ₹95.40 lakh for failing to credit amounts involved in unauthorised electronic transactions within the mandatory 10 working-day window, not providing customers 24x7 access to report such transactions, and manual intervention in the system-based asset classification process in certain Kisan Credit Card accounts. Bank of India was fined ₹58.50 lakh for collecting ad-hoc service, inspection and processing charges on certain priority sector loans of up to ₹25,000, and for not paying interest on certain matured term deposits from maturity until repayment. Central Bank of India faced a penalty of ₹63.60 lakh for KYC-related violations, including a failure to upload the KYC records of certain customers to the Central KYC Records Registry within the prescribed timeline and the opening of additional basic savings bank deposit accounts for customers who already held one at the bank, in breach of RBI's BSBDA directions.
SUPERVISORY INSPECTIONS UNDERPIN ACTIONS
The RBI stated that all three enforcement actions were based on deficiencies found during statutory supervisory inspections, adding that the penalties are not intended to pronounce upon the validity of any transaction or agreement entered into by the banks with their customers. Each institution was given the opportunity to respond formally to the show-cause notice before a final order was issued.
The inspections assessed each institution's financial position as at 31 March 2025. Before imposing the penalties, the RBI considered each bank's reply to the notice, additional submissions and oral submissions made during a personal hearing.
THE RULES BEHIND THE PENALTIES
The Bank of India penalty related to ad-hoc service, inspection and processing charges levied on priority sector loans with sanctioned amounts of up to ₹25,000, which the RBI's priority sector lending directions prohibit, rather than to any lending-target shortfall. For Union Bank of India, the requirement to credit (shadow-reverse) the amount involved in an unauthorised electronic transaction within 10 working days of the customer's notification comes from the RBI's directions on limiting customer liability in unauthorised electronic banking transactions. The RBI noted that the imposition of penalties is without prejudice to any other action that may be initiated against the banks.