The Reserve Bank of India on Friday imposed a monetary penalty of Rs 91 lakh on HDFC Bank for multiple violations of banking regulations, including deficiencies in Know Your Customer compliance, interest rate practices, and outsourcing norms.
The penalty order, issued on November 18, follows a statutory inspection for supervisory evaluation based on the bank’s financial position as of March 31, 2024. The central bank found the private lender in contravention of provisions under the Banking Regulation Act, 1949, and non-compliance with RBI directions on interest rates on advances, outsourcing guidelines, and KYC requirements.
Key Violations Identified:
According to the RBI, HDFC Bank adopted multiple benchmarks within the same loan category, violating transparency norms in lending practices. The bank also outsourced the function of determining KYC compliance for certain customers to external agents, which the central bank considers a violation as KYC is deemed a core banking function.
Additionally, a wholly-owned subsidiary of the bank undertook business activities not permissible for banking companies under Section 6 of the Banking Regulation Act. The RBI issued a show-cause notice to the bank after supervisory findings revealed these non-compliance issues. After reviewing the bank’s written and oral submissions, the regulator sustained the charges and proceeded with the penalty under Section 47A(1)(c) read with Section 46(4)(i) of the Act.
The RBI clarified that the penalty addresses only regulatory compliance deficiencies and “is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers”. The imposition is also without prejudice to any future action the central bank may initiate against the lender
