Shares in India's ICICI, Axis and HDFC banks fell on Tuesday after the central bank found them guilty of violating guidelines relating to customer verification and anti-money-laundering.
The three banks were probed for suspected laundering after a sting operation by news outlet Cobrapost in March and April exposed alleged business irregularities at Indian financial institutions.
An investigation by the Reserve Bank of India did not reveal any direct evidence of money laundering, but some violations of rules were found after scrutinising the books and business operations of the three banks.
"We came to the conclusion that some of the violations were substantiated and warranted imposition of monetary penalty," an RBI statement said.
The RBI said late Monday that it had fined Axis Bank 50 million rupees ($855,000), HDFC 45 million rupees and ICICI 10 million rupees.
Axis Bank shares fell 2.53 percent to 1,322.0 rupees in Mumbai trading Tuesday, while ICICI was down 3.42 percent at 1,080.0 rupees and HDFC lost 0.68 percent to 672.65 rupees.
The RBI said any "conclusive inference" in relation to money laundering could be drawn only if there was an investigation of the transactions by tax and enforcement agencies.
None of the three banks' spokesmen were available for comment.
Various banks suspended staff after the Cobrapost allegations, which called the scale of money laundering "vast and unfathomable".
Cobrapost in May released some secret recordings of conversations it made with officials from banks and insurance firms. Bank officials were heard confirming that money laundering -- whereby the source of money obtained by illicit means is concealed -- was common and they would "help" people who wished to do it.
Cobrapost in March released recordings of conversations with bank employees who were heard agreeing to take cash from an undercover reporter posing as a customer, although no money changed hands.
The issue of so-called "black money" -- funds not reported to the government for tax purposes or parked abroad to avoid tax -- is one of the issues that has roiled Prime Minister Manmohan Singh's administration.