Kotak Mahindra Bank Penalised ₹62 Lakh By RBI For Violating Banking Guidelines

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹61.95 lakh on Kotak Mahindra Bank for non-compliance with certain regulatory guidelines. The action was taken after the central bank identified multiple compliance lapses during a statutory inspection of the bank. The penalty order was issued on 11 December 2025, following a detailed review of the bank’s operations and regulatory adherence.

Reason for RBI’s Penalty On Kotak Mahindra Bank

According to the RBI, Kotak Mahindra Bank failed to follow guidelines related to Basic Savings Bank Deposit (BSBD) accounts, Business Correspondents (BCs), and credit information reporting. These issues were identified during the Statutory Inspection for Supervisory Evaluation (ISE 2024) conducted with reference to the bank’s financial position as on 31 March 2024.

The inspection revealed that the bank had opened more than one BSBD account for the same customers, which is a clear violation of RBI norms. As per existing rules, a customer is permitted to maintain only one BSBD account, and opening additional accounts undermines the purpose of financial inclusion regulations.

Misuse of Business Correspondents

The RBI also found that Kotak Mahindra Bank allowed its Business Correspondents to undertake activities that were outside the permitted scope defined by the regulator. Business Correspondents are authorized to provide limited banking services, and exceeding these limits goes against RBI’s operational guidelines. Such lapses indicate weaknesses in internal controls and monitoring mechanisms.

Incorrect Credit Data Reporting

Another major violation related to the reporting of borrower information to Credit Information Companies (CICs). The inspection showed that the bank furnished incorrect or inaccurate credit data for certain borrowers, which is a contravention of the provisions of the Credit Information Companies (Regulation) Act and Rules, 2006. Accurate credit reporting is crucial for maintaining transparency and ensuring the reliability of the credit system.

RBI’s Clarification

The RBI clarified that it had examined the bank’s response to the show-cause notice and other submissions before imposing the penalty. The regulator also stated that the action is based solely on compliance deficiencies and does not question the validity of any customer transactions or agreements.

Impact on Kotak Mahindra Bank

While the financial impact of the penalty is limited due to the relatively small amount involved, the action highlights the importance of strong compliance systems. The penalty affects the bank’s regulatory standing and emphasizes the need for improved internal controls, better monitoring of third-party arrangements, and accurate regulatory reporting.

Regulatory Reminder for the Banking Sector

The RBI penalty serves as a reminder to all banks that strict adherence to regulatory guidelines is essential, especially in areas such as financial inclusion accounts, Business Correspondent operations, and credit data reporting. Even well-established banks are expected to maintain high standards of compliance to preserve transparency, customer trust, and the stability of the banking system.