A penalty of Rs 91 lakh has been imposed on HDFC Bank for violating certain provisions of the Banking Regulation Act, the Reserve Bank said on Friday.
The penalty has been imposed on the private sector lender for deficiencies in statutory and regulatory compliance, including those related to Know Your Customer (KYC).
The penalty has been imposed on the private sector lender for contravention of certain provisions of the Banking Regulation (BR) Act and non-compliance with certain directions on ‘Interest Rate on Advances', 'Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks' and KYC.
RBI said a Statutory Inspection for Supervisory Evaluation of the bank was conducted with reference to its financial position as on March 31, 2024.
Based on supervisory findings of non-compliance with the provisions of the BR Act, RBI directions and related correspondence in that regard, RBI issued a notice to the bank.
After considering the bank's reply to the notice and additional submissions made by it, RBI said the charges against the bank were sustained, warranting the imposition of a monetary penalty.
RBI said HDFC Bank had adopted multiple benchmarks within the same loan category, and it had outsourced the function of determining compliance with KYC norms of certain customers to its outsourcing agents.
Also, a wholly-owned subsidiary of the bank undertook business which is not a permissible business that can be undertaken by a banking company under Section 6 of the BR Act, the RBI said.
The central bank, however, said the penalty 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, it added.
In another statement, the RBI said a penalty of Rs 3.1 lakh has been imposed on Mannakrishna Investments for non-compliance with certain provisions of the ‘Master Direction – Reserve Bank of India (Non-Banking Financial Company - Scale Based Regulation) Directions, 2023', relating to ‘Governance Issues'.