The Reserve Bank of India has imposed penalties totalling INR 2.91 crore on two of the country's largest private-sector lenders, Axis Bank and HDFC Bank, for separate regulatory infractions identified during supervisory examination. The action was announced on 10 September 2024.
Axis Bank received the larger penalty of INR 1.91 crore, with the central bank citing lapses in know-your-customer procedures, the taking of collateral security for agricultural loans of up to INR 1.60 lakh that should have been collateral-free, breaches of deposit interest rate directions, and a contravention of Section 19(1)(a) of the Banking Regulation Act after a wholly owned subsidiary carried on technology-service-provider business not permitted for a banking company. HDFC Bank was separately fined INR 1 crore for failures relating to deposit interest rate rules, the conduct of recovery agents, and standards of customer service. The two penalties were imposed following distinct supervisory findings at each institution.
KYC LAPSES AND AGRICULTURAL CREDIT VIOLATIONS AT AXIS BANK
The KYC finding at Axis Bank was that it had allotted multiple customer identification codes to certain customers instead of a single Unique Customer Identification Code (UCIC) for each customer.
The finding related to collateral-free agricultural loans indicates that the bank had obtained collateral security for agricultural loans of up to INR 1.60 lakh in certain cases, even though RBI directions require such loans to be collateral-free.
HDFC Bank's INR 1 crore penalty pointed to shortcomings in deposit-related conduct, the treatment of customers by recovery agents, and the quality of service provided to retail customers. The RBI found that HDFC Bank had given gifts costing more than INR 250 to depositors when accepting certain deposits, opened savings accounts for ineligible entities, and failed to ensure customers were not contacted by recovery agents between 7 pm and 7 am.
WIDER RBI ENFORCEMENT
The central bank issued monetary penalties against a number of banks and non-bank lenders during 2024.
The RBI emphasised in its communications that the penalties were imposed on the basis of regulatory deficiencies and did not reflect any judgment on the validity of specific transactions between the banks and their customers.