RBI penalizes Axis Bank, HDFC Bank for regulatory compliance deficiencies

The Reserve Bank of India (RBI) announced penalties totaling Rs 2.91 crore on Axis Bank and HDFC Bank due to deficiencies in regulatory compliance.

Axis Bank was fined Rs 1.91 crore for violating specific provisions of the Banking Regulation Act and failing to comply with guidelines related to 'Interest Rate on Deposits', 'Know Your Customer (KYC)', and 'Credit Flow to Agriculture-Collateral free agricultural loans'. An RBI evaluation of Axis Bank, referencing its financial status as of March 31, 2023, revealed these issues, leading to the issuance of a notice. After reviewing Axis Bank's response, the RBI confirmed the charges and imposed the monetary penalty.

Similarly, HDFC Bank faced a Rs 1 crore penalty for not adhering to guidelines on 'interest rate on deposits', 'recovery agents engaged by banks', and 'customer service in banks'. An inspection based on the bank’s financial position as of March 31, 2022, highlighted these non-compliances. Following HDFC Bank's reply to the notice and additional submissions, the RBI upheld the charges, justifying the monetary penalty.

Specifically, the RBI found that Axis Bank had opened savings accounts for ineligible entities, issued multiple customer identification codes instead of a unique code for each customer, and secured collateral for agricultural loans up to Rs 1.60 lakh. Additionally, a subsidiary of Axis Bank was engaged in technology services, a business activity not permitted for banking companies.

For HDFC Bank, the RBI identified that the bank provided gifts exceeding Rs 250 in value to depositors, opened savings accounts for ineligible entities, and contacted customers outside permitted hours (before 7 am and after 7 pm).

The RBI emphasized that these penalties are based on statutory and regulatory compliance deficiencies and do not affect the validity of transactions or agreements between the banks and their customers.