RBI imposes heavy fine on this bank: Here's how it'll impact customers

New Delhi (The Uttam Hindu) : The Reserve Bank of India (RBI) acts as a strict regulator in the Indian banking system. Whenever a bank deviates from established standards and regulations, the central bank takes action without delay. In this context, Kotak Mahindra Bank, one of the country's leading private banks, has been fined ₹61.95 lakh for negligence and violations of regulations.

The investigation revealed several serious flaws

A detailed investigation conducted by the RBI found that Kotak Mahindra Bank had not complied with several key provisions of banking regulations. The most significant discrepancy was related to the Basic Savings Bank Deposit Account (BSBD). According to the rules, only one BSBD account can be opened for eligible customers, but the bank opened additional accounts in the names of customers who already had such accounts.

Additionally, the bank entered into agreements with its Business Correspondents (BCs) that permitted them to engage in activities beyond their designated jurisdiction. Furthermore, the investigation revealed that incorrect information about some borrowers was submitted to the Credit Information Company (CIC). This lapse is considered serious, as inaccurate data can impact an individual's credit score.

Before imposing the penalty, the RBI issued a show-cause notice to the bank as per regulations. The bank provided a response and explanation, but after examining the documents and arguments, the central bank found them unsatisfactory. According to the RBI, the bank violated the provisions of Section 47A(1)(c) of the Banking Regulation Act and the Credit Information Companies (Regulation) Act, 2005, which led to the punitive action.

Customers need not panic. The RBI has clarified that this penalty will not impact customer deposits or investments. This action is solely related to regulatory compliance lapses. This means that customers' accounts, fixed deposits, loans, and other banking transactions will remain completely safe and valid. This action once again indicates that the RBI is in no mood to relax its commitment to maintaining discipline and transparency in the banking system.