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The Reserve Bank of India has imposed a combined penalty of Rs.2.9 crore on HDFC Bank and Axis Bank, two of the biggest private banks in the country for lapses in regulatory compliance.
According to a statement, the apex bank has imposed a fine of Rs.1.91 crore and Rs.1 crore to Axis Bank and HDFC Bank, respectively.
Axis Bank Violated Provisions of Banking Regulations Act
In the statement, RBI noted that Axis Bank violated provisions of the Banking Regulation Act and failed to adhere to regulations related to 'Interest Rate on Deposits,' 'Know Your Customer,' and 'Credit Flow to Agriculture-Collateral Free Agricultural Loans.'
The statement further noted that Axis Bank also opened savings accounts for ineligible entities, along with issuing multiple customer identification codes instead of a Unique Customer Identification Code.
RBI added that Axis Bank even accepted collateral for agricultural loans up to Rs 1.60 lakh in some cases.
Moreover, Axis Bank also provided technology services, a business not permitted for banking firms in India.
"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," said RBI in the statement.
The apex bank added: "Further, imposition of monetary penalty is without prejudice to any other action that may be initiated by RBI against the bank."
Why HDFC Bank was Fined?
In the statement, RBI said that HDFC Bank failed to comply with directives regarding 'Interest Rate on Deposits,' 'Recovery Agents Engaged by Banks,' and 'Customer Service in Banks.'
The apex bank added that HDFC Bank opened accounts for ineligible entities, and the financial institution also failed to ensure that customers were not contacted after 7 p.m. and before 7 a.m.
"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,'' said RBI.
