RBI Penalises Bandhan Bank ₹41.80 Lakh for KYC Non-Compliance and Director Loan Violations
Summary
The Reserve Bank of India imposed a monetary penalty of ₹41.80 lakh on Bandhan Bank Limited for contravention of section 20(1)(b)(iii) of the Banking Regulation Act, 1949 and non-compliance with RBI's Know Your Customer directions. The violations sustained after a show-cause notice and personal hearing were: failure to carry out periodic review of risk categorisation of certain categories of accounts, and sanctioning of director-related loans. The penalty was imposed in exercise of powers under section 47A(1)(c) read with section 46(4) of the BR Act, based on supervisory findings from an inspection with reference to the bank's financial position as of March 31, 2025.
“The Reserve Bank of India (RBI) has, by an order dated April 21, 2026 imposed a monetary penalty of ₹41.80 lakh (Rupees Forty One Lakh Eighty Thousand only) on Bandhan Bank Limited (the bank) for contravention of the provisions of section 20(1)(b)(iii) of the Banking Regulation Act, 1949 (BR Act) and non-compliance with certain directions issued by RBI on 'Know Your Customer'.”
Banks subject to RBI supervisory evaluation should audit their periodic review processes for risk categorisation and their related-party lending controls against section 20(1)(b)(iii) of the BR Act. The personal hearing process described here shows that the RBI afford banks an opportunity to respond before finalising penalties, but that participation does not prevent penalty imposition when violations are sustained.
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What changed
The RBI penalty addresses two specific supervisory findings: the bank's failure to conduct periodic review of risk categorisation for certain account categories, and the sanctioning of director-related loans. The enforcement action was preceded by a statutory inspection, issuance of a show-cause notice, and a personal hearing at which the bank made oral submissions. The RBI has clarified that the penalty does not pronounce upon the validity of any customer transaction and is without prejudice to any further action.
Banks and financial institutions regulated by the RBI should review their KYC compliance programs to ensure periodic risk categorisation reviews are conducted as required, and verify that internal controls prevent the sanctioning of loans to related parties without proper compliance with statutory requirements. The reference to section 20(1)(b)(iii) of the BR Act indicates restrictions on lending to directors and their interests, a provision designed to prevent conflicts of interest and protect depositor interests.
Penalties
Monetary penalty of ₹41.80 lakh (Rupees Forty One Lakh Eighty Thousand only)
Archived snapshot
Apr 25, 2026GovPing captured this document from the original source. If the source has since changed or been removed, this is the text as it existed at that time.
Press Releases
| () | |
| Date : Apr 24, 2026 | |
| Reserve Bank of India imposes monetary penalty on Bandhan Bank Limited | |
| The Reserve Bank of India (RBI) has, by an order dated April 21, 2026 imposed a monetary penalty of ₹41.80 lakh (Rupees Forty One Lakh Eighty Thousand only) on Bandhan Bank Limited (the bank) for contravention of the provisions of section 20(1)(b)(iii) of the Banking Regulation Act, 1949 (BR Act) and non-compliance with certain directions issued by RBI on ‘Know Your Customer’. This penalty has been imposed in exercise of powers conferred on RBI under the provisions of section 47 A (1) (c) read with section 46 (4) of the BR Act.
The Statutory Inspection for Supervisory Evaluation of the bank was conducted by RBI with reference to its financial position as on March 31, 2025. Based on supervisory findings of non-compliance with the provisions of BR Act, RBI directions and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said RBI directions.
After considering the bank’s reply to the notice and oral submissions made during the personal hearing, RBI found, inter alia, that the following charges against the bank were sustained, warranting imposition of monetary penalty:
- The bank failed to carry out periodic review of risk categorisation of certain categories of accounts, and
- The bank had sanctioned director related loans. The action is based on deficiencies in statutory and 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 RBI against the bank.
(Brij Raj)
Chief General Manager
Press Release: 2026-2027/140 | | The Reserve Bank of India (RBI) has, by an order dated April 21, 2026 imposed a monetary penalty of ₹41.80 lakh (Rupees Forty One Lakh Eighty Thousand only) on Bandhan Bank Limited (the bank) for contravention of the provisions of section 20(1)(b)(iii) of the Banking Regulation Act, 1949 (BR Act) and non-compliance with certain directions issued by RBI on ‘Know Your Customer’. This penalty has been imposed in exercise of powers conferred on RBI under the provisions of section 47 A (1) (c) read with section 46 (4) of the BR Act.
The Statutory Inspection for Supervisory Evaluation of the bank was conducted by RBI with reference to its financial position as on March 31, 2025. Based on supervisory findings of non-compliance with the provisions of BR Act, RBI directions and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said RBI directions.
After considering the bank’s reply to the notice and oral submissions made during the personal hearing, RBI found, inter alia, that the following charges against the bank were sustained, warranting imposition of monetary penalty:
- The bank failed to carry out periodic review of risk categorisation of certain categories of accounts, and
- The bank had sanctioned director related loans. The action is based on deficiencies in statutory and 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 RBI against the bank.
(Brij Raj)
Chief General Manager
Press Release: 2026-2027/140 |
The Statutory Inspection for Supervisory Evaluation of the bank was conducted by RBI with reference to its financial position as on March 31, 2025. Based on supervisory findings of non-compliance with the provisions of BR Act, RBI directions and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said RBI directions.
After considering the bank’s reply to the notice and oral submissions made during the personal hearing, RBI found, inter alia, that the following charges against the bank were sustained, warranting imposition of monetary penalty:
- The bank failed to carry out periodic review of risk categorisation of certain categories of accounts, and
- The bank had sanctioned director related loans. The action is based on deficiencies in statutory and 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 RBI against the bank.
(Brij Raj)
Chief General Manager
Press Release: 2026-2027/140 | |
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