Despite increased penalties, critics argue that India’s central bank needs a more effective deterrence framework as fines remain modest compared to global standards and enforcement gaps persist amid calls for greater accountability and coordination.
India’s central bank has been levying more penalties, but the amounts remain modest by global standards, raising an old question anew: do these fines genuinely deter misconduct or are they little more than a cost of doing business? According to Business Standard, the Reserve Bank of India imposed 241 penalties totalling ₹26.33 crore on regulated entities in fiscal 2026, down from ₹54.78 crore in fiscal 2025 and ₹86.11 crore in fiscal 2024. The largest penalty the RBI has ever imposed was ₹58.9 crore, handed to ICICI Bank in March 2018.
Former State Bank of India chairman Dinesh Kumar Khara argued in the report that the framework needs a reset if it is to have bite, pointing to the sharper penalty architecture now used in other parts of Indian law. The Digital Personal Data Protection Act, 2023, for instance, allows for penalties on institutions ranging from ₹50 crore to ₹250 crore, depending on the breach and its impact, according to the Act’s penalty schedule and adjudication provisions. That comparison has sharpened scrutiny of the RBI’s own ceilings, particularly because many banking breaches, such as failures in know-your-customer checks, do not involve a quantifiable amount and therefore attract only the base penalty.
The article also highlights a structural problem: by the time a penalty is imposed, the supervisory cycle to which it relates may be long past and the managers responsible may have moved on. That has led some experts to argue for stronger personal accountability, including clawbacks and pay-linked sanctions, rather than relying mainly on institutional fines. Rishi Agrawal of TeamLease RegTech said the penalties are a tiny fraction of sector earnings and asked whether repeat violations are becoming expensive enough to stop future breaches.
There is also an unevenness in how different regulated entities are treated. Under the Banking Regulation Act, banks can face a penalty of up to ₹1 crore, or twice the quantifiable amount involved, whichever is higher. NBFCs face a far lower starting point under the RBI Act: ₹10 lakh, or twice the quantifiable amount, whichever is higher. Practitioners quoted by Business Standard say that gap may not fit the reality of a financial system in which banks, NBFCs and other entities increasingly operate across overlapping regulatory domains. Some are now arguing for a more coordinated model, while others caution that importing turnover-based penalties from competition law into financial regulation could trigger legal challenges of its own.
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