The Reserve Bank of India (RBI) has imposed a total penalty of Rs 2.91 crore on Axis Bank and HDFC Bank for deficiencies in statutory and regulatory compliance. A statement issued by RBI on Tuesday outlined the penalties, with Rs 1.91 crore levied on Axis Bank for contravening several provisions of the Banking Regulation Act and failing to comply with directives related to ‘Interest Rate on Deposits’, ‘Know Your Customer (KYC)’, and ‘Credit Flow to Agriculture-Collateral Free Agricultural Loans’.
HDFC Bank, on the other hand, faced a penalty of Rs 1 crore for non-compliance with specific directives concerning ‘Interest Rate on Deposits’, ‘Recovery Agents Engaged by Banks’, and ‘Customer Service in Banks’, the central bank added in a separate release.
Regarding Axis Bank, the RBI revealed that a supervisory evaluation was conducted with respect to its financial position as of 31 March 2023, and a review of its subsidiary’s activities was carried out. A notice was then issued to the bank. Following Axis Bank’s response to the notice, the RBI concluded that the charges against the bank were valid, leading to the imposition of the monetary penalty. Axis Bank was found to have opened savings deposit accounts for ineligible entities and allotted multiple customer identification codes instead of a unique code for each customer. Additionally, the bank had obtained collateral security for agricultural loans of up to Rs 1.60 lakh in certain instances, which contravenes regulations. Moreover, a subsidiary of Axis Bank had engaged in technology services, which is not permitted for banking companies.
In the case of HDFC Bank, the RBI’s statutory inspection for supervisory evaluation was conducted with reference to its financial position as of 31 March 2022. Based on supervisory findings of non-compliance and correspondence with the bank, a notice was issued. After considering the bank’s response, along with additional and oral submissions, the RBI found the charges warranted a monetary penalty. Among the violations, HDFC Bank had offered gifts (in the form of paying first-year premiums for complimentary life insurance) exceeding Rs 250 to depositors and opened savings accounts for ineligible entities. The bank also failed to ensure that customers were not contacted outside regulated hours (7 pm to 7 am).
However, the central bank clarified that the penalties are strictly for deficiencies in regulatory compliance and do not reflect on the validity of transactions or agreements the banks entered into with customers.
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