RBI Imposes ₹2.70 Lakh Penalty on Northern Arc Capital for KYC Non‑Compliance

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹2.70 lakh on Northern Arc Capital Limited for non‑compliance with specific provisions of the RBI’s Know Your Customer (KYC) Directions. The order, dated January 29, 2026, was issued under the powers granted to RBI through Section 58G(1)(b) read with Section 58B(5)(aa) of the Reserve Bank of India Act, 1934.

The penalty follows a supervisory review that examined the company’s adherence to regulatory guidelines. RBI stated that the action is based purely on deficiencies in regulatory compliance identified during inspection.

Background of RBI’s Inspection

The statutory inspection of Northern Arc Capital Limited was conducted with reference to its financial position as of March 31, 2024. During this inspection, RBI identified several instances of non‑compliance with its KYC Directions, prompting further examination.

Based on these supervisory findings, the central bank issued a notice advising the company to explain why a penalty should not be imposed. The company was provided with an opportunity to submit a written response, additional documents, and oral submissions during a personal hearing.

Charge Sustained by the Regulator

After reviewing the company’s replies and hearing its submissions, RBI concluded that one major charge was sustained. The central bank found that Northern Arc Capital had failed to implement any IT system or software for effective identification and reporting of suspicious transactions.

This failure constituted a breach of mandatory KYC compliance requirements, which require regulated entities to maintain robust monitoring systems. RBI determined that the lapse warranted the imposition of a monetary penalty under the applicable regulations.

Scope and Nature of the Action

RBI emphasised that the penalty is related solely to deficiencies in regulatory compliance observed during the inspection. The central bank clarified that the action does not question the validity of any transactions or agreements between Northern Arc Capital and its customers.

The imposition of the monetary penalty is also without prejudice to any further supervisory or enforcement actions that RBI may undertake in future. This ensures the continuation of oversight while maintaining procedural fairness.

Read More: FM Announces High Level Committee on Banking, NBFC Restructuring and Market Reforms.

Conclusion

The enforcement action against Northern Arc Capital highlights RBI’s continued focus on ensuring strict compliance with KYC norms across the financial sector. The regulator’s findings underline the importance of implementing appropriate technological systems to detect and report suspicious activities.

RBI’s decision reinforces its mandate to strengthen the integrity of financial operations and enhance adherence to regulatory standards. The case also underscores the broader expectation that all financial institutions maintain adequate systems to meet evolving compliance requirements.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.