The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs 3 lakh on The Karnal Central Cooperative Bank Limited for non-compliance with regulatory directions related to Know Your Customer (KYC) norms.

The penalty, imposed through an order dated June 3, 2026, follows supervisory findings arising from a statutory inspection conducted by the National Bank for Agriculture and Rural Development with reference to the bank's financial position as of March 31, 2025.

According to RBI, the bank failed to establish a system for periodic review of risk categorisation of customer accounts and did not implement a robust software mechanism for effective identification and reporting of suspicious transactions. After reviewing the bank's response, additional submissions, and oral representations during a personal hearing, the central bank concluded that the violations warranted a monetary penalty of Rs 3 lakh.

RBI clarified that the action is based solely on deficiencies in regulatory compliance and does not affect the validity of any transactions or agreements entered into by the bank with its customers. The regulator also noted that the penalty is without prejudice to any further action that may be initiated against the bank.