RBI cracks the whip on compliance lapses, penalises Kotak Mahindra, IDFC First, and PNB

In a strong message to the banking sector, the Reserve Bank of India (RBI) has imposed monetary penalties on Kotak Mahindra Bank , IDFC First Bank , and Punjab National Bank (PNB) for failing to comply with regulatory guidelines. The combined penalties, totalling over ₹1.29 crore, highlight lapses ranging from improper customer service practices to violations of lending and KYC norms.

By an order dated April 11, 2025, the RBI imposed a penalty of ₹61.40 lakh on Kotak Mahindra Bank for violating directions on the ‘Loan System for Delivery of Bank Credit’ and ‘Loans and Advances – Statutory and Other Restrictions’.

The bank was found to have failed to ensure that the loan component met the minimum specified percentage of sanctioned fund-based working capital limits for certain borrowers. The bank was also not compliant with margin requirements for intra-day limits provided to certain stockbrokers.

These findings emerged from RBI’s Inspection for Supervisory Evaluation (ISE 2023), based on the bank’s financials as of March 31, 2023.

Secondly, in a separate order dated April 3, 2025, the RBI fined IDFC First Bank ₹38.60 lakh for non-compliance with Know Your Customer (KYC) guidelines.

Following a scrutiny process, the RBI found that the bank had failed to conduct proper Customer Due Diligence (CDD) when opening current accounts for certain sole proprietorship firms.

After going through the bank’s replies—both written and spoken—the RBI decided that the rules were indeed broken, and the bank should be fined.

Thirdly, on April 4, 2025, Punjab National Bank was penalised ₹29.60 lakh for failing to follow the RBI’s directions on Customer Service in Banks.

The key violation was that the bank levied penal charges for non-maintenance of minimum balance in inoperative accounts, which is a breach of customer service norms. The irregularity was discovered during the ISE 2023 exercise. RBI acted after due process, including a show-cause notice and hearings.

In all three cases, the RBI clarified that the penalties are based solely on deficiencies in regulatory compliance. These actions are not intended to call into question the validity of any transaction or agreement entered into by the banks with their customers. The RBI also said that these fines do not stop it from taking more action against the banks in the future, if needed.

“This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers. Further, imposition of monetary penalty is without prejudice to any other action that may be initiated by the RBI against the bank,” stated the RBI press release.