In a recent enforcement action, the Reserve Bank of India (RBI) has levied substantial fines on two major banks for lapses in regulatory compliance. Axis Bank faces a penalty of Rs 1.91 crore, while HDFC Bank has been fined Rs 1 crore. The penalties underscore the RBI’s ongoing commitment to stringent oversight and regulatory adherence within the banking sector.
According to the RBI’s announcement, Axis Bank was penalized for failing to adhere to several provisions of the Banking Regulation Act. Key issues included violations related to deposit interest rates, KYC (Know Your Customer) norms, and regulations governing collateral-free agricultural loans. Specifically, Axis Bank had improperly managed customer accounts by issuing multiple identification codes and had secured collateral for agricultural loans that should have been unsecured.
The central bank’s scrutiny revealed that Axis Bank also engaged in activities that exceeded permissible boundaries for banking institutions, including unauthorized business activities by its technology service subsidiary.
For HDFC Bank, the RBI’s penalty was imposed following a comprehensive inspection of its practices as of March 31, 2022. The RBI identified several compliance shortfalls, including improper gift practices and failure to adhere to customer contact regulations. The bank was found to have given gifts exceeding the permissible limit and failed to ensure that recovery agents adhered to appropriate contact times.
The RBI emphasized that these fines reflect breaches of statutory and regulatory compliance rather than questioning the validity of the banks’ transactions with their customers. Both banks have been directed to rectify the identified issues to avoid future penalties and ensure alignment with regulatory standards.
