The Reserve Bank of India (RBI) on Friday, May 28, imposed a monetary penalty of Rs 10 crore on HDFC Bank Limited for violation of provisions of section 6(2) and section 8 of the Banking Regulation Act, 1949 (the Act). The central bank said in a statement today that this action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or an agreement entered into by the bank with its customers. (Also Read: RBI Asks HDFC Bank To Stop Digital Launches, New Credit Cards )
According to the statement, an examination of documents in the matters of marketing and the sale of third-party non-financial products to the bank’s customers, arising from a whistle blower complaint to the RBI, regarding irregularities in the auto loan portfolio of the bank, revealed violation of the above-mentioned provisions of the Banking Regulation Act.
The RBI said that after considering the bank’s reply to the show cause notice, the oral submissions made during the personal hearing, as well as examination of further clarifications or documents furnished by the bank, it was concluded that the aforesaid charge of contravention of provisions of the Banking Regulation Act was substantiated and a warranted imposition of monetary penalty.
Section 8 of the Banking Regulation Act states that a bank cannot directly or indirectly deal with buying, selling, or bartering of goods. However, a bank may barter the transactions relating to bills of exchange received for collection or negotiation.
The penalty was imposed in the exercise of powers vested by the central bank under the provisions of Section 47A(1)(c) read with Section 46(4)(i) of the Banking Regulation Act.
Meanwhile, last year, the Reserve Bank directed the private-sector lender to temporarily stop all launches of its upcoming digital business-generating activities and sourcing of new credit card customers after a power outage of its primary data centre.