RBI imposes Rs 1 crore penalty on HDFC Bank

The Reserve Bank of India (RBI) on Wednesday imposed a monetary penalty of Rs 1 crore on HDFC Bank for non-compliance with master direction on Know Your Customer (KYC) norms.

The RBI in a release said, "This action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers."

RBI said, the on-site Inspection for Supervisory Evaluation of the bank for the financial year ended March 31, 2017, revealed that the bank had failed to exercise ongoing due diligence in 39 current accounts that were opened its customers for bidding in Initial Public Offer. It was observed that the transactions effected in these current accounts were disproportionate to the declared income and profile of the customers.

Following this, the bank has issued a notice to the bank to show cause as to why penalty should not be imposed for non-compliance with the direction. After considering the reply received from the bank and oral submissions made in the personal hearing, RBI came to the conclusion that the aforesaid charge of non-compliance with the direction was sustained and warranted imposition of monetary penalty.

The penalty has been imposed in exercise of powers vested in RBI under the provisions of section 47 A (1) (c) read with section 46 (4) (i) of the Banking Regulation Act, 1949, taking into account the failure of the bank to adhere to the aforesaid direction issued by RBI.