RBI Imposes Rs 91 Lakh Penalty on HDFC Bank for Regulatory Breaches
The Reserve Bank of India has slapped a penalty of Rs 91 lakh on HDFC Bank for multiple regulatory violations, including KYC norm lapses and unauthorized business activities by a subsidiary.
Key Takeaways
- Rs 91 lakh penalty for Banking Regulation Act violations
- KYC compliance outsourcing to third-party agents
- Multiple benchmarks used within same loan category
- Subsidiary engaged in non-permissible banking activities
Inspection Findings and Regulatory Breaches
The penalty follows a Statutory Inspection for Supervisory Evaluation conducted as of March 31, 2024. The RBI identified several compliance deficiencies during this assessment.
HDFC Bank was found contravening provisions of the Banking Regulation Act and specific directions on ‘Interest Rate on Advances’ and outsourcing guidelines for financial services.
Specific Violations Identified
The central bank noted that HDFC Bank had adopted multiple benchmarks within the same loan category, creating potential customer fairness issues.
More seriously, the bank had outsourced the critical function of determining KYC compliance for certain customers to external agents, raising concerns about regulatory oversight.
A wholly-owned subsidiary of HDFC Bank also engaged in business activities not permitted under Section 6 of the Banking Regulation Act.
Penalty Rationale and Scope
After considering the bank’s response to the show-cause notice, the RBI determined the charges were substantiated and warranted monetary penalty.
The regulator clarified that this penalty addresses deficiencies in statutory compliance only and does not question the validity of any customer transactions or agreements.
