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Governance Concerns Surface: Director-Linked Loans and Compliance Gaps Put Bank Under Scrutiny
Anytime News Network | Pooja Srivastava
. Tightening its grip on regulatory compliance, the Reserve Bank of India (RBI) has imposed a monetary penalty of ₹41.80 lakh on Bandhan Bank Limited for violations of KYC norms and provisions of the Banking Regulation Act, 1949. The move highlights serious lapses in internal controls and governance standards.
According to RBI, the bank failed to conduct periodic reviews of risk categorisation for certain account categories—an essential requirement under the KYC framework. Additionally, the bank sanctioned loans linked to its directors, raising red flags over compliance with regulatory norms and corporate governance principles.
The violations came to light during RBI’s statutory inspection based on the bank’s financial position as of March 31, 2025. Following the findings, a show-cause notice was issued. However, after reviewing the bank’s response and oral submissions, the regulator concluded that the charges were substantiated and warranted monetary penalty.
Industry experts note that such lapses go beyond procedural errors and indicate deeper systemic issues. Failure to comply with KYC norms can expose the financial system to risks such as money laundering and fraud. Meanwhile, granting director-related loans undermines transparency and raises concerns about conflict of interest within the institution.
Although RBI clarified that the penalty pertains only to regulatory deficiencies and does not affect the validity of customer transactions, the development has triggered concerns among stakeholders regarding trust and accountability in the banking sector.
This action serves as a strong reminder that banks must adhere strictly to compliance frameworks, maintain robust governance standards, and prioritize transparency to sustain credibility in an increasingly regulated financial environment.
