The Reserve Bank of India (RBI) has imposed a combined penalty of Rs 2.91 crore on Axis Bank and HDFC Bank for lapses in regulatory compliance.
In a statement, the RBI said that a fine of Rs 1.91 crore has been imposed against Axis Bank for violating provisions of the Banking Regulation Act and failing to adhere to regulations related to ‘Interest Rate on Deposits,’ ‘Know Your Customer (KYC),’ and ‘Credit Flow to Agriculture-Collateral Free Agricultural Loans.’
HDFC Bank was fined Rs 1 crore for failing to comply with directives regarding ‘Interest Rate on Deposits,’ ‘Recovery Agents Engaged by Banks,’ and ‘Customer Service in Banks.’
The RBI’s supervisory evaluation of Axis Bank, which reviewed the bank’s financial position as of March 31, 2023, revealed several compliance issues. The bank had opened savings accounts for ineligible entities, issued multiple customer identification codes instead of a Unique Customer Identification Code (UCIC), and accepted collateral for agricultural loans up to Rs 1.60 lakh in some cases.
Further, a subsidiary of Axis Bank was found to be engaged in technology services, a business not permitted for banking companies.
“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,” the RBI said in a statement.
In the case of HDFC Bank, the RBI’s inspection of the bank’s financial position as of March 31, 2022, uncovered non-compliance with RBI guidelines. The bank had provided gifts, such as paying the first-year premium for complimentary life insurance, costing over Rs 250 to depositors at the time of account opening. It also opened accounts for ineligible entities.
HDFC Bank also “failed to ensure that customers are not contacted after 7 pm and before 7 am”.
“Based on supervisory findings of non-compliance with RBI directions and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said directions. After considering the bank’s reply to the notice, additional submissions made by it and oral submissions made during the personal hearing, RBI found, inter alia, that the following charges against the bank were sustained, warranting imposition of monetary penalty,” the top bank said.