Reserve Bank of India has imposed a Rs 10 crore fine on HDFC Bank. The monetary penalty has been imposed on the private sector lender for contravention of provisions of section 6(2) and section 8 of the Banking Regulation Act, 1949, the central bank said in a statement on Friday.
This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers, RBI clarified.
The action has been taken after RBI looked into a whistleblower complaint about irregularities in HDFC Bank’s vehicle loan division on July 23, 2020. The complaint reportedly claimed that the lender forced its customers to purchase a vehicle tracking device for four years till December 2019, which stands in contravention of the abovementioned sections of the Banking Regulations Act that prohibit banks from indulging in non-financial businesses.
“An examination of documents in the matter of marketing and sale of third-party non-financial products to the bank’s customers, arising from a whistleblower complaint to RBI regarding irregularities in the auto loan portfolio of the bank, revealed, inter alia, contravention of the aforesaid provisions of the Act and the regulatory directions,” RBI said. “In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for contravention of the provisions of the Act/directions.”
Aditya Puri, the then managing director and chief executive officer of HDFC Bank, told shareholders during an annual general meeting that the bank, following the whistleblower complaint, has investigated the matter and took disciplinary action against employees involved.
“After considering the bank’s reply to the show-cause notice, oral submissions made during the personal hearing and examination of further clarifications/documents furnished by the bank, RBI came to the conclusion that the aforesaid charge of contravention of provisions of the Act was substantiated and warranted imposition of monetary penalty,” the central bank said.