The Reserve Bank of India levied a monetary penalty on Jammu and Kashmir Bank in January 2025, imposing a penalty of ₹3.318 crore (₹3,31,80,000) by an order dated 14 January 2025 for non-compliance with its directions on Basic Savings Bank Deposit Accounts (BSBDA), Know Your Customer and 'Loans and Advances – Statutory and Other Restrictions'. The RBI found that the bank had allowed certain BSBDA holders to also open savings accounts, had not identified beneficial owners when opening accounts of certain legal persons, had allowed operations in small accounts that did not meet regulatory requirements, and had sanctioned a working capital demand loan to a corporation against amounts receivable as government subsidies.
Basic savings bank deposit accounts are a financial inclusion instrument introduced by the RBI to provide no-frills banking access to individuals with limited or no prior engagement with the formal financial system. The accounts are designed to reduce barriers to banking for lower-income households. RBI rules restrict holders of such accounts from simultaneously maintaining standard savings accounts with the same bank.
LOANS AGAINST GOVERNMENT SUBSIDIES
Another charge concerned a working capital demand loan the bank sanctioned to a corporation against amounts receivable by way of subsidies from the government, contrary to the RBI's directions on loans and advances. The bank's failure to observe this restriction was one of the charges the RBI found sustained after its inspection.
The RBI said the action is based on deficiencies in statutory and regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.
ABOUT THE BANK
Jammu and Kashmir Bank operates primarily in the Union Territories of Jammu and Kashmir and Ladakh, where it acts as banker to the Union Territory governments.
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