RBI slaps Rs 2.91 crore penalty on Axis Bank and HDFC BankBusiness News

September 11, 2024 21:04
RBI slaps Rs 2.91 crore penalty on Axis Bank and HDFC Bank

(Image source from: REUTERS)

The Reserve Bank of India (RBI) has imposed a fine of Rs 2.91 billion on Axis Bank and HDFC Bank for non-compliance with regulatory norms. Axis Bank has been fined Rs 1.91 billion for violating banking regulations, the Reserve Bank of India (RBI) said in a statement. These violations include defaults related to “Deposit Rate”, “Know Your Customer (KYC)” and “Agricultural Credit Flow – Unsecured Agricultural Loans”. Meanwhile, HDFC Bank was fined Rs 1,000 crore for failing to follow guidelines on interest rates, customer service practices and use of debt collection agencies. RBI's regulatory assessment of Axis Bank, assessing its financial position as of March 31, 2023, has uncovered several compliance issues. This included opening savings accounts for unauthorized companies, which was a direct violation of regulatory standards. Issuing multiple customer identification codes in place of Unique Customer Identification Code (UCIC) and accepting security for agricultural loans up to Rs 160,000 in certain cases. In addition, a subsidiary of Axis Bank was found to be providing technology services that are not permitted for banking companies.

The central bank said in a statement: This action is based on non-compliance with legal and regulatory requirements and does not assert the authenticity of transactions or contracts that the bank has concluded with its customers. Furthermore, the imposition of a penalty will not affect any other action that the RBI may take against the bank. In the case of HDFC Bank, the RBI investigation was based on its financial position as on March 31, 2022. The central bank found several violations, particularly the granting of gifts to cover the premium for the first year of free life insurance. The limit is 250 rupees. HDFC Bank was found to have opened savings accounts for unauthorized persons in line with the violations found in the Axis Bank case. HDFC Bank also “failed to ensure that it does not call customers after 7pm and before 7am”.

Based on regulators' findings of non-compliance with the Central Bank's instructions and related measures, a notice has been issued asking banks to identify the reason for non-compliance with these instructions. After considering the Bank's response to this notice, the Bank's additional submissions and the oral submissions made at the personal hearing, the RBI concludes that, inter alia, the following allegations against the Bank are substantiated and the imposition of a penalty is justified: "We RBI said that there. The RBI has imposed fines on both the banks but has clarified that the fines are due to violations only and do not reflect the validity of any transactions or agreements between the banks and their customers. The message from the central bank is clear. Financial institutions must strictly follow the guidelines to ensure transparency, protect customers and maintain the integrity of the banking system. This fine is a reminder to all banks to remain vigilant and maintain high compliance standards to avoid financial and credit damage.

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