RBI imposes monetary penalty on Axis Bank, HDFC Bank

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹1.91 crore on Axis Bank for non-compliance with certain directions issued by RBI on ‘Interest Rate on Deposits’, ‘Know Your Customer (KYC)’ and ‘Credit Flow to Agriculture- Collateral free agricultural loans’.

The central bank also imposed a monetary penalty of ₹1 crore on HDFC Bank for non-compliance with certain directions issued by the banking regulator on ‘Interest Rate on Deposits’, ‘Recovery Agents engaged by Banks’ and ‘Customer Service in Banks’.

In a press release on the penalty on Axis Bank, the central bank says the statutory inspection of the bank was conducted on March 31, 2023 and a review of activities of its subsidiary company was carried out. “Based on supervisory findings of contravention of provisions of BR Act and non-compliance with the 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 provisions of BR Act and RBI directions,” it says.

Axis Bank opened certain savings deposit accounts in the name of ineligible entities, says RBI. The bank had allotted multiple customer identification code to certain customers instead of a Unique Customer ldentification Code (UCIC) for each customer. It bank had obtained collateral security for agricultural loans up to ₹1.60 lakh in certain cases; and a wholly owned subsidiary of the bank undertook business of technology service provider, which is not permissible business that can be undertaken by a banking company, says the regulator.

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

On HDFC Bank, the RBI says the statutory inspection of the bank was conducted on 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 advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said directions. After considering the bank’s reply to the notice, additional submissions made by it and oral submissions made during the personal hearing, RBI found that the following charges against the bank were sustained, warranting imposition of monetary penalty,” it says.

The bank: gave gifts in the form of paying first-year premium for the complimentary life insurance cover costing more than ₹250 to the depositors at the time of accepting certain deposits; 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.