RBI Imposes ₹91 Lakh Penalty on HDFC Bank

Context:

The Reserve Bank of India (RBI) has imposed a penalty of ₹91 lakh on HDFC Bank following violations detected during its Statutory Inspection for Supervisory Evaluation (ISE 2024), which assessed the bank’s financial position as on March 31, 2024.

The penalty is for non-compliance with the Banking Regulation (BR) Act, RBI directions, and related guidelines.

Key Findings

1. Interest Rate Benchmark Violations

• The bank adopted multiple interest rate benchmarks within the same loan category, contrary to RBI norms.

2. Unauthorized Business Activities

• A wholly-owned subsidiary engaged in business activities not permitted under Section 6 of the BR Act.

3. KYC Outsourcing Non-Compliance

• The bank outsourced compliance with KYC norms for certain customers to agents, which violated RBI regulations requiring banks to maintain oversight and accountability.

Norms / Provisions Violated by HDFC Bank

When RBI carried out its Statutory Inspection for Supervisory Evaluation (ISE 2024) — as of 31 March 2024 — it found multiple violations by HDFC Bank. The key norms breached were:

• Violation of certain provisions of the Banking Regulation Act, 1949 (BR Act), especially Section 19(1)(a) and Section 6(1).
• Non-compliance with RBI’s regulatory directions regarding:
  1. Interest Rate on Advances (i.e. lending/loan interest rate norms).
  2. Code of Conduct and Risk Management Guidelines for Outsourcing of Financial Services by banks (i.e. improper outsourcing).
  3. Know Your Customer (KYC) norms — regulatory standards on customer identification, due diligence, and ongoing compliance.