HDFC Bank Mumbai/IBNS: The Reserve Bank of India (RBI) has imposed a penalty of Rs 10 crore on HDFC Bank after finding deficiencies in regulatory compliance by the bank's auto loan department
RBI identified the violations after an investigation pertaining to the allegations of non-compliance and said, “in the matter of marketing and sale of third-party non-financial products to the bank’s customers, arising from a whistle blower complaint to RBI regarding irregularities in the auto loan portfolio of the bank, revealed contravention of the… provisions of the Act and the regulatory directions.”
“After considering the bank’s reply to the show cause notice, oral submissions made during the personal hearing and examination of further clarifications/documents furnished by the bank, RBI came to the conclusion that the aforesaid charge of contravention of provisions of the Act was substantiated and warranted imposition of monetary penalty.
With the penalty on India's largest private sector lender, the RBI has sent a clear message to banks, according to experts.
A Money Control report said the irregularities in HDFC's auto loan disbursal first surfaced in social media and HDFC had only responded with a statement after a sustained social media campaign by a whistle-blower and subsequent reports in the media.
The allegations were related to misselling of GPS products as the bank's executives forced borrowers to buy the devices. The devices were manufactured by a Mumbai firm, Trackpoint GPS, cost of Rs 18,000 per piece, stated the Money Control report.
Misselling or forced selling non-financial products by the bank is a crime in the eyes of the banking regulator.
In HDFC Bank's AGM, former CEO Aditya Puri acknowledged the misconduct by the bank and an internal probe when he said an internal probe was conducted erring employees and appropriate action was taken.
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