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The Reserve Bank of India (RBI) has levied significant fines on two prominent Indian banks, HDFC Bank and Axis Bank, for their failure to comply with various regulatory directives. HDFC Bank, India's leading private sector bank, was fined ₹1.91 crore for non-compliance with several RBI directions. These directives encompassed aspects related to interest rates on deposits, the practices of recovery agents engaged by banks, and the standards of customer service provided by the bank.
The RBI's scrutiny of HDFC Bank stemmed from a statutory inspection conducted on March 31, 2022. Following the inspection, a show cause notice was issued to the bank, outlining the areas of non-compliance. Based on the evidence presented and subsequent oral hearings, the RBI decided to penalize HDFC Bank. Key violations included the bank's practice of offering gifts exceeding ₹250 crore to depositors in exchange for their deposits. Additionally, HDFC Bank was found to have opened savings accounts for ineligible entities and failed to implement policies to prevent customer contact outside the designated hours of 7 am to 7 pm.
Meanwhile, Axis Bank was fined ₹1 crore for contravening certain provisions of the Banking Regulation Act, 1949, and for failing to comply with specific RBI directives on interest rates on deposits, know your customer (KYC) procedures, and the provision of credit to the agricultural sector for collateral-free agricultural loans. The RBI's investigation into Axis Bank's compliance was initiated through a statutory inspection of the bank's financial position on March 31, 2023. Similar to HDFC Bank, Axis Bank was issued a show cause notice following the inspection, outlining the observed non-compliance. Upon reviewing Axis Bank's response to the notice, the RBI concluded that the bank had opened savings accounts for ineligible entities and assigned multiple customer identification codes to individual customers, instead of adhering to the requirement of a Unique Customer Identification Code (UCIC).
Further scrutiny revealed that Axis Bank had obtained collateral security for agricultural loans below ₹1.60 lakh in certain instances. Furthermore, one of Axis Bank's wholly owned subsidiaries had taken over the business of a service provider, an action deemed impermissible by the RBI. These instances of non-compliance underscore the importance of stringent adherence to regulatory guidelines in the banking sector. The RBI's actions serve as a clear signal that non-compliance with its directives will not be tolerated, and penalties will be imposed to ensure accountability and safeguard the integrity of the Indian banking system.
Source: HDFC Bank fined ₹1.91 crore, Axis Bank penalized ₹1 crore for non-compliance with RBI directions