RBI slaps monteary penalty on Axis Bank and HDFC Bank

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The Reserve Bank of India (RBI) has slapped a monetary penalty of ₹1.91 crore on Axis Bank and ₹1 crore on HDFC Bank for non-compliance with certain regulatory directions.

In the case of Axis Bank, RBI said the monetary penalty has been imposed for non-compliance with certain directions issued by it on ‘Interest Rate on Deposits’, ‘Know Your Customer (KYC)’ and ‘Credit Flow to Agriculture- Collateral free agricultural loans’, per a RBI statement.

In the case of HDFC Bank, RBI said the monetary penalty has been imposed for 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 (Banking Codes and Standards Board of India) Code and ‘Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by banks’, the central bank said in another statement.

Referring to the Statutory Inspection for Supervisory Evaluation (ISE 2023) of Axis Bank conducted with reference to its financial position as of March 31, 2023, and a review of activities of its subsidiary company, RBI observed that the Bank opened certain savings deposit accounts in the name of ineligible entities; and allotted multiple customer identification code to certain customers instead of a Unique Customer identification Code (UCIC) for each customer.

Further, the Central Bank also found that the bank had obtained collateral security for agricultural loans up to ₹1.60 lakh in certain cases; and a wholly owned subsidiary of the bank undertook business of technology service provider, which is not a permissible business that can be undertaken by a banking company under the Banking Regulation Act.

HDFC Bank

Referring to the Statutory Inspection for Supervisory Evaluation (ISE 2022) of HDFC Bank conducted regarding its financial position as of March 31, 2022, RBI noted that the Bank gave gifts (in the form of paying a first-year premium for the complimentary life insurance cover) costing more than ₹250 to the depositors at the time of accepting certain deposits.

Further, the Bank opened certain savings deposit accounts in the name of ineligible entities; and failed to ensure that customers are not contacted after 7 pm and before 7 am.

In the case of both Banks, RBI said: “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.”