The Reserve Bank of India (RBI), through an order dated February 27, 2025, has imposed a monetary penalty of ₹1 lakh on The Magadh Central Co-operative Bank Limited, Bihar, for non-compliance with RBI’s directives on ‘Know Your Customer (KYC)’. This penalty has been levied under the powers granted to RBI by Section 47A(1)(c), read with Sections 46(4)(i) and 56 of the Banking Regulation Act, 1949.
A statutory inspection of the bank, conducted by the National Bank for Agriculture and Rural Development (NABARD) based on its financial position as of March 31, 2024, revealed non-compliance with RBI’s directions. Following supervisory findings and subsequent correspondence, a notice was issued to the bank, requiring it to explain why a penalty should not be imposed for its failure to adhere to the prescribed norms. After reviewing the bank’s response, oral submissions during a personal hearing, and additional documents, RBI determined that the bank had indeed violated regulations by:
- Failing to implement a system for periodic risk categorisation reviews of accounts at least once every six months.
This penalty is solely due to regulatory non-compliance and does not affect the validity of any transactions or agreements between the bank and its customers. Additionally, it does not preclude RBI from taking further action against the bank if necessary.
