Karnataka Bank Faces ₹18.57 Crore Loss Due to UPI Transaction Issue, Notifies RBI

Karnataka Bank Ltd announced on Monday, February 17, that it has identified deficiencies in its reconciliation process for cross-border UPI transactions, leading to an estimated loss of ₹18.57 crore, net of immediate recovery. The private sector lender assured that its operations and customer services remain unaffected despite the issue.

Deficiencies in the Reconciliation Process Discovered

During a review of suspicious UPI Global transactions, Karnataka Bank detected reconciliation issues that resulted in transaction reversals to customers. The bank confirmed that this discrepancy does not impact its overall operations or the quality of customer service. The matter was reported to the Reserve Bank of India (RBI) on February 17, 2025.

Steps Taken to Address the Issue

Karnataka Bank has initiated measures to recover the lost amount and implemented additional control mechanisms to prevent similar issues in the future. In a regulatory filing, the bank stated: “The bank will initiate necessary actions towards recovery of the amount involved and has also put in place additional control processes to prevent recurrence.”

Q3 FY25 Performance

The announcement comes as Karnataka Bank reported a net profit of ₹283.6 crore for the quarter ending December 2024, reflecting a 14.3% decline from ₹331 crore reported in the same period last year. Additionally, the bank’s net interest income (NII) for the quarter stood at ₹792.8 crore, marking a 4.2% drop from ₹827.6 crore a year ago.

Regulatory and Risk Management Measures

As part of its risk management strategy, Karnataka Bank has reinforced its reconciliation processes to mitigate potential discrepancies in UPI transactions. The bank remains committed to strengthening its internal controls and ensuring compliance with regulatory norms.

Despite the reported loss, Karnataka Bank maintains that the deficiency will not disrupt its regular banking operations and continues to focus on customer service excellence.

Stock Performance

On February 18, 2025, Karnataka Bank share price traded 0.57% lower at ₹172.95 at 9:45 AM (IST). Karnataka Bank’s share price reached a 52-week high of ₹259.40, and a 52-week low of ₹172.45. As per BSE, the total traded volume for the stock stood at 4227 shares with a turnover of ₹7.32 lakhs.

At the current price, Karnataka Bank shares are trading at a price-to-earnings (P/E) ratio of 5.05x, based on its trailing 12-month earnings per share (EPS) of ₹34.25, and a price-to-book (P/B) ratio of 0.57, according to exchange data.

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