The Reserve Bank of India has imposed a monetary penalty of ₹61.95 lakh on Kotak Mahindra Bank Limited for non-compliance with statutory directions covering basic savings accounts, business correspondent operations, and credit reporting standards. The enforcement action followed a statutory inspection of the private lender’s financial position and operations with reference to March 31, 2024. Following the supervisory evaluation, the central bank issued a show-cause notice to the lender, giving it an opportunity to explain why penal measures should not be initiated, before issuing the formal penalty order on December 11, 2025. The action was taken under relevant provisions of the Banking Regulation Act, 1949, and the Credit Information Companies (Regulation) Act, 2005.
Duplicate Savings Accounts Breach Regulatory Framework
A primary compliance deficiency cited by the banking regulator involved the management of Basic Savings Bank Deposit accounts. The central bank found that Kotak Mahindra Bank had opened fresh basic savings accounts for individuals who already held active accounts under the same category within the bank. Regulatory norms explicitly restrict each customer to a single basic savings account per institution, a safeguard established to ensure basic banking facilities are administered properly and to prevent the unauthorized duplication of zero-balance or simplified accounts.
The findings pointed to critical vulnerabilities in the bank’s onboarding procedures and customer verification architecture. Regulatory expectations mandate that commercial lenders maintain robust internal validation systems to detect existing relationships before onboarding customers into specialized account categories. Opening duplicate basic accounts revealed operational shortcomings in internal cross-verification, raising regulatory concern over the institution’s ability to enforce standard retail banking safeguards across its network.
Business Correspondent Arrangements Exceed Prescribed Limits
The inspection further uncovered non-compliance in the arrangements governing the bank’s business correspondents. The regulator found that the bank entered into agreements that allowed third-party representatives to carry out activities beyond their permitted statutory scope. While business correspondents serve as crucial intermediaries for extending basic banking services such as account enrollment, cash collection, and disbursements to underbanked areas, financial institutions are required to keep their functional mandates strictly within prescribed operational boundaries.
The central bank determined that the bank failed to exercise proper oversight over these contractual engagements, allowing correspondent operations to exceed permissible regulatory thresholds. The lapse emphasized persistent deficiencies in vendor management, contractual oversight, and field-level operational checks. The regulator reiterated that third-party distribution channels must remain subject to strict institutional governance and active supervision to safeguard consumer interests and maintain compliance across branchless banking networks.
Inaccurate Credit Reporting Weakens Data Integrity
The central bank also cited the lender for submitting inaccurate and incomplete borrower details to credit information companies. Under current legal frameworks, commercial banks must provide complete and truthful credit histories to licensed credit bureaus, which compile comprehensive records utilized by lenders across the country to assess applicant creditworthiness, repayment discipline, and debt burdens. Inaccurate reporting undermines the integrity of these shared industry databases and can impair a borrower’s ability to access credit.
The regulator noted that the reporting failures reflected inadequate internal data validation and a lack of necessary pre-submission controls. The RBI clarified that the monetary penalty addresses specific statutory compliance lapses identified during supervisory scrutiny and does not represent an assessment of the validity of underlying transactions between the bank and its account holders. The action reinforces supervisory expectations for institutional accountability, strict adherence to third-party oversight guidelines, and high standards of borrower data governance across the banking sector.
Follow for daily updates on cybercrime, corporate fraud, DFIR, hacking, investigations, and digital forensics
