RBI fines HDFC Bank, Mannakrishna Investments for regulatory lapses
New Delhi, Nov 28
The Reserve Bank of India on Friday informed that it had imposed monetary penalties on HDFC Bank Limited and Mannakrishna Investments Private Limited for non-compliance with rules and directions.
The RBI said that it fined HDFC Bank Rs 91 lakh for breaches of section 19(1)(a), section 6(1) of the Banking Regulation Act, 1949 and non‑compliance with RBI directions on interest rates on advances, outsourcing of financial services and Know Your Customer norms.
A statutory inspection revealed that the bank had adopted multiple benchmarks within the same loan category.
A wholly owned subsidiary of the bank undertook business that is not a permissible business that can be undertaken by a banking company under Section 6 of the BR Act, the statement from the RBI said.
The central bank also found that the bank violated rules by outsourcing the function of determining compliance with KYC norms of certain customers to its outsourcing agents.
The RBI also imposed a penalty of Rs 3.10 lakh on Mannakrishna Investments for governance lapses by violating provisions in its Master Direction to Non-Banking Financial Company (NBFC).
The company had failed to take prior written permission of the RBI while appointing a director, resulting in a change in management on account of a change in more than 30 per cent of its directors, excluding independent directors.
The RBI said the actions on HDFC Bank and Mannakrishna Investments arise from deficiencies in regulatory compliance, and do not pronounce on the validity of any customer transactions.
In September, HDFC Bank's branch in Dubai International Financial Centre, namely ‘DIFC branch’, was barred by the Dubai Financial Services Authority (DFSA) from onboarding or soliciting new clients.
The HDFC branch was also banned from soliciting, onboarding or engaging in any financial promotions with any new client.
— IANS
Reader Comments
Good to see RBI taking action! Banks need to follow rules strictly. But Rs 91 lakh penalty for HDFC is like pocket change for them. Should have been much higher to actually make them learn their lesson.
Outsourcing KYC compliance? That's a serious breach! KYC is fundamental to banking security. As an HDFC customer, I'm worried about how my data was handled. Will they compensate customers for this negligence?
The Dubai incident in September and now this penalty - HDFC seems to be having compliance issues across geographies. Time for better internal controls and governance. Hope they fix this soon.
Mannakrishna Investments penalty is small but significant. Not taking RBI permission for director appointment shows casual attitude towards regulations. All financial institutions must follow proper procedures. ðŸ‘
While I appreciate RBI's vigilance, I hope this doesn't affect HDFC's services to existing customers. They're one of the better banks in terms of digital services and customer support. Hope they improve compliance without compromising service quality.
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