RBI imposed Penalty on 4 Banks – BoB, BoM, IDBI and ICICI Bank, Know Why!

The Reserve Bank of India (RBI) has recently imposed monetary penalties on four major banks — Bank of Baroda, IDBI Bank, Bank of Maharashtra, and ICICI Bank — for failing to comply with various regulatory guidelines. These fines were issued after RBI conducted inspections of the banks’ financial and operational activities for the financial years ending in 2023 and 2024. The purpose of these penalties is to enforce better compliance with banking rules and to ensure that banks operate transparently and responsibly. However, RBI clarified that these actions are related strictly to regulatory issues and do not impact the validity of transactions or agreements between the banks and their customers.

Bank of Baroda was fined ₹61.40 lakh for not following RBI’s directions on customer service and interest rates on deposits. The bank allowed an insurance company to give non-cash incentives to its staff, which is against the rules. Additionally, interest was not credited on time to certain dormant or frozen savings accounts. These issues came to light during an RBI inspection in 2023. The bank was asked to explain its actions, and after reviewing its response and a personal hearing, RBI decided to impose the penalty.

IDBI Bank was fined ₹31.80 lakh for not complying with the RBI’s rules under the Interest Subvention Scheme, which provides interest relief to farmers on short-term loans through the Kisan Credit Card (KCC). The bank was found to have charged interest at a higher rate than permitted in some KCC accounts. This violation was discovered during the inspection based on its financial position as of March 31, 2023. After considering the bank’s explanations, the RBI concluded that a penalty was necessary.

Bank of Maharashtra received a fine of ₹31.80 lakh for failing to fully comply with Know Your Customer (KYC) rules. The bank opened several deposit accounts using Aadhaar-based e-KYC through OTP, in a non-face-to-face manner, but did not meet all the regulatory requirements for such processes. This was identified during the RBI’s evaluation for the financial year ending March 31, 2024. The bank’s explanations and submissions were reviewed, and the penalty was imposed for deficiencies in following the KYC norms.

ICICI Bank faced the highest penalty of ₹97.80 lakh. The bank failed to report a cyber security incident to the RBI within the required time, did not implement an effective system for alerting suspicious account activity, and also failed to send credit card statements to certain customers—yet charged them late payment fees. These failures were considered serious breaches of customer service and operational transparency. After a detailed inspection and review of the bank’s responses, the RBI imposed the penalty.

These penalties are aimed at reinforcing the importance of following regulatory standards. RBI emphasized that these fines are not judgments on the legal validity of customer transactions or contracts, but are strictly based on gaps in compliance. Penalties have been imposed in exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Sections 46(4)(i) and 51(1) of the Banking Regulation Act, 1949.