The RBI has imposed monetary penalties on HDFC Bank and Axis Bank for failing to comply with specific directives issued by the central bank.

The Reserve Bank of India (RBI) has, by an order dated September 03, 2024 imposed a monetary penalty of Rs 1 crore on HDFC Bank for non-compliance with certain directions issued by RBI.

RBI has imposed a monetary penalty of Rs 1.91 crore on Axis Bank.

HDFC Bank Penalty

The central bank said the penalty is due to non-compliance with certain directions issued by it on ‘Interest Rate on Deposits’, ‘Recovery Agents engaged by Banks’ and ‘Customer Service in Banks’ read with the BCSBI Code and ‘Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks’.

Based on supervisory findings of non-compliance with RBI directions and related correspondence in that regard, a notice was issued to the HDFC bank advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said directions, RBI said.

After considering the bank’s reply to the notice, additional submissions made by it and oral submissions made during the personal hearing, RBI found, inter alia, that the following charges against the bank were sustained, warranting imposition of monetary penalty.

The bank:

a. gave gifts (in the form of paying first-year premium for the complimentary life insurance cover) costing more than Rs 250 to the depositors at the time of accepting certain deposits;

b. opened certain savings deposit accounts in the name of ineligible entities; and

c. failed to ensure that customers are not contacted after 7 pm and before 7 am.

The RBI added that the action is based on deficiencies in statutory and regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.

Further, imposition of monetary penalty is without prejudice to any other action that may be initiated by RBI against the bank.

Axis Bank Penalty

RBI has imposed a monetary penalty of Rs 1.91 crore on Axis Bank for contravention of provisions of Section 19 (1) (a) of the Banking Regulation Act, 1949 (BR Act), and non-compliance with certain directions issued by RBI on ‘Interest Rate on Deposits’, ‘Know Your Customer (KYC)’ and ‘Credit Flow to Agriculture- Collateral free agricultural loans’.

Based on supervisory findings of contravention of provisions of BR Act and non-compliance with the RBI directions and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the provisions of BR Act and RBI directions, RBI said in a press release on Tuesday.

After considering the bank’s reply to the notice, additional submissions made by it and oral submissions made during the personal hearing, RBI found, inter alia, that the following charges against the bank were sustained, warranting imposition of monetary penalty:

The bank opened certain savings deposit accounts in the name of ineligible entities;

-The bank had allotted multiple customer identification code to certain customers instead of a Unique Customer identification Code (UCIC) for each customer;

-The bank had obtained collateral security for agricultural loans upto Rs 1.60 lakh in certain cases; and

-A wholly owned subsidiary of the bank undertook business as a technology service provider, which is not permissible business that can be undertaken by a banking company under Section 6 of the BR Act.

The action is based on deficiencies in statutory and regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.

Further, imposition of monetary penalty is without prejudice to any other action that may be initiated by RBI against the bank.