Executive Summary: The Reserve Bank of India has imposed a monetary penalty on Jammu and Kashmir Bank Limited for contraventions related to Grievance Redressal (Internal Ombudsman), Customer Service, DEA Fund transfers, and KYC norms (V-CIP).
Penalty Amount
₹99.30 Lakh
Bank Entity
J&K Bank Ltd.
Statutory Basis
Sec 47A(1)(c) / Sec 46(4)(i) BR Act
Inspection Date
March 31, 2024
Detailed Violation Analysis & Preventive Controls
| Area of Non-Compliance | Root Cause Analysis (RCA) | Preventive Controls (Remediation) |
|---|---|---|
|
1. Internal Ombudsman (IO) Mechanism Failure to escalate partly/wholly rejected complaints to the Internal Ombudsman. |
Process Gap Lack of automated triggers in the CRM/Grievance module to auto-forward rejected cases. Reliance on manual discretion by complaint handlers to mark cases for IO review. |
System Control Implement “Auto-Escalation Logic” in the CRM. If a complaint status is changed to “Rejected” or “Partially Accepted,” the system must mandatory lock closure until IO review is completed. |
|
2. Customer Service Communications Failure to send final letters with Banking Ombudsman (BO) details. |
Template/Training Use of outdated closure templates or manual email drafting that omits the mandatory “Escalation Matrix” clause regarding the RBI Ombudsman. |
Standardization Hard-code the BO escalation clause into the system-generated final response letter (FRL). Disable free-text editing for the regulatory footer in closure emails. |
|
3. Depositor Education and Awareness (DEA) Fund Failure to transfer eligible unclaimed amounts within the stipulated period. |
Data Logic Inaccurate logic in identifying “Inoperative > 10 Years” accounts, or manual delays in generating the challan/file for RBI transfer during the narrow monthly window. |
Automation Automate the identification script to run on the T-1 day of the transfer window. Implement a “Maker-Checker” alert if the DEA transfer batch is not authorized by the cut-off date. |
|
4. Video KYC (V-CIP) Lack of face matching technology & failure to verify economic profile. |
Vendor/Tech Deficiency Adoption of a V-CIP solution that lacked AI-based “Face Match” (Confidence Score) against OVD. Inadequate User Acceptance Testing (UAT) against RBI Master Direction requirements. |
Technology Upgrade 1. Deploy AI Face Match with a minimum confidence score threshold (e.g., 80%). 2. Make “Economic Profile” fields mandatory in the V-CIP journey, requiring customer verbal confirmation recorded on video. |
Lessons Learnt & Strategic Takeaways
- Automate Regulatory Interlocks: Reliance on manual staff compliance for high-volume activities (like complaint letters or DEA transfers) is a high-risk strategy. Systems must enforce compliance (e.g., preventing complaint closure without IO review).
- Vendor Compliance is Bank Compliance: When outsourcing technology like Video KYC, the bank remains liable. Robust “Tech Audits” of vendor solutions against specific RBI Master Directions are critical before go-live.
- Consumer Protection is Paramount: The penalty highlights RBI’s zero-tolerance for suppressing customer grievance channels (IO/BO mechanism). Transparency in rejection letters is a non-negotiable right.