The Reserve Bank of India imposed a monetary penalty of Rs 10 crore against HDFC Bank Limited for violating the provisions of sections 6(2) and section 8 of the Banking Regulation Act, 1949 (the Act).
RBI stated that this action is due to the deficiencies in regulatory compliance and they are not intended to prounounce upon the sustainibility of any agreement and transaction entered in the bank with its customers.
“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.
“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, inter alia, contravention of the afore-said provisions of the Act and the regulatory directions,” the order said.
It added: “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.”
The irregualarities in the auto loan portfolio pertains to the charges including bank’s executives has forced the borrowers to buy GPS devices.
“We had received some whistle-blowing complaints, internal inquiries carried out in the matter on the complaints received has not brought out any conflict of interest issue nor does it have any bearing on our loan portfolio,” HDFC Bank’s former chief Puri said at the company’s annual general meeting (AGM) on July 18.
“Enquiry did bring out another aspect related to personal misconduct exhibited by a set of individuals for which appropriate disciplinary actions have been taken,” Puri added.
