The Reserve Bank of India on Friday imposed a penalty of Rs 10 crore on HDFC Bank due to deficiencies in regulatory compliance. The case pertains to marketing and sale of third-party non-financial products along with auto loan to bank customers. The regulator said penalty was based on deficiencies in regulatory compliance and was not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.
“RBI has imposed, by an order dated May 27, 2021, a monetary penalty of Rs 10 crore on HDFC Bank Limited (the bank) for contravention of provisions of Section 6(2) and Section 8 of the Banking Regulation Act, 1949 (the Act),” RBI said.
It said 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. “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 whistle blower complaint to RBI regarding irregularities in the auto loan portfolio of the bank, revealed contravention of the aforesaid provisions of the act and the regulatory directions, ” RBI said.
The regulator has imposed penalty after considering the bank’s reply to the showcause notice, oral submissions made during the personal hearing and examination of further clarifications/documents furnished by the lender.
The irregularities in the auto loan portfolio pertains to the charges that the bank’s executives had forced the borrowers to buy GPS devices bundled with the auto loans.