RBI penalises Axis Bank, HDFC Bank for deficiencies in regulatory compliance

The RBI has imposed penalties totalling ₹2.91 crore on Axis Bank and HDFC Bank for certain deficiencies in statutory and regulatory compliance.

In a statement on Tuesday, the Reserve Bank of India (RBI) said a penalty of ₹1.91 crore has been imposed on Axis Bank for contravention of certain provisions of the Banking Regulation Act, and non-compliance with certain directions on 'Interest Rate on Deposits', 'Know Your Customer (KYC)' and 'Credit Flow to Agriculture—Collateral-free agricultural loans'.

A penalty of ₹1 crore has been imposed on HDFC Bank for non-compliance with certain directions on 'interest rate on deposits', 'recovery agents engaged by banks' and 'customer service in banks', it said in another release.

Regarding Axis Bank, the RBI said a supervisory evaluation of the bank was conducted by the RBI with reference to its financial position as of March 31, 2023, and a review of activities of its subsidiary company was carried out. A notice was issued.

After considering Axis Bank's reply to the notice, the RBI said charges against the bank were sustained, warranting imposition of a monetary penalty.

The RBI said the bank had opened certain savings deposit accounts in the name of ineligible entities.

Also, it had allotted multiple customer identification codes to certain customers instead of a Unique Customer Identification Code (UCIC) for each customer.

The RBI further said Axis Bank had obtained collateral security for agricultural loans up to ₹1.60 lakh in certain cases.

A wholly owned subsidiary of the bank undertook business as a technology service provider, which is not permissible business that can be undertaken by a banking company, it added.

In the case of HDFC Bank, the RBI said a statutory inspection for supervisory evaluation of the bank was conducted with reference to its financial position as of March 31, 2022. Based on supervisory findings of non-compliance with RBI directions and related correspondence in that regard, a notice was issued to the bank.

After considering the HDFC Bank's reply to the notice, additional submissions made by it, and oral submissions made during the personal hearing, the RBI found, inter alia, that the following charges against the bank were sustained, warranting imposition of monetary penalty, the RBI said.

The RBI said HDFC Bank gave gifts (in the form of paying a first-year premium for the complimentary life insurance cover) costing more than ₹250 to the depositors at the time of accepting certain deposits.

It opened certain savings deposit accounts in the name of ineligible entities and failed to ensure that customers are not contacted after 7 pm and before 7 am.

The central bank, however, added that the penalties are based on deficiencies in statutory and regulatory compliance and are not intended to pronounce upon the validity of any transaction or agreement entered into by the banks with their customers.