RBI Fines HDFC Bank Rs 91 Lakh for Regulatory Lapses

RBI Imposes Penalty on HDFC Bank

The Reserve Bank of India (RBI) has levied a monetary penalty of Rs 91 lakh on HDFC Bank for violations of specific provisions under the Banking Regulation Act. The action was taken following the identification of deficiencies in statutory and regulatory compliance, including Know Your Customer (KYC) norms.

Details of the Violation

The central bank highlighted that HDFC Bank contravened certain provisions of the Banking Regulation (BR) Act and failed to comply with RBI directives related to:

• Interest rates on advances
• Guidelines on managing risks and code of conduct in outsourcing of financial services
• KYC compliance

Supervisory Evaluation and Findings

RBI conducted a statutory inspection to assess HDFC Bank’s financial position as of March 31, 2024. The inspection revealed multiple instances of non-compliance, prompting the RBI to issue a formal notice to the bank. After reviewing HDFC Bank’s response and additional submissions, the RBI confirmed the violations, leading to the imposition of the monetary penalty.

Specific Issues Identified

Among the concerns cited:

• The bank applied multiple benchmarks within the same loan category.
• Compliance with KYC norms for certain customers was outsourced to external agents.
• A wholly-owned subsidiary engaged in activities not permitted under Section 6 of the BR Act.

RBI clarified that the penalty relates solely to regulatory deficiencies and does not challenge the validity of any agreements or transactions conducted by the bank with its customers. The central bank also noted that this penalty does not limit any further action that may be initiated against HDFC Bank.

Penalty on Mannakrishna Investments

In a separate announcement, the RBI imposed a penalty of Rs 3.1 lakh on Mannakrishna Investments. The fine was for non-compliance with specific provisions of the ‘Master Direction – Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023,’ particularly concerning governance issues.

Conclusion

These actions underscore the RBI’s ongoing commitment to ensuring strict adherence to statutory and regulatory guidelines in both banking and non-banking financial sectors.

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Sorit Chaudhary

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