RBI fines HDFC Bank

„Apex bank finds irregularities in auto loan portfolio

The Reserve Bank of India (RBI) has imposed a penalty of Rs 10 crore on the country’s largest private sector lender, HDFC Bank, for irregularities in the bank’s auto loan portfolio. The central bank in a statement on Friday said that it had received a whistleblower complaint regarding these irregularities and its investigations found that the lender had breached the banking regulations.

“An examination of documents 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, inter alia, contravention of the...provisions of the (Banking

Regulation) Act and regulatory directions.”

The RBI had issued a show cause notice to the bank asking why a penalty should not be imposed on it for violating certain rules.

“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 the and imposition of penalty,” the said.

The RBI said that the lender had breached Section 6(2) and Section 8 of the Banking Regulation Act. Under Section 6(2) a bank isn’t allowed to enter into any business, which doesn’t fit into the list of activities allowed. Under Section 8, a bank cannot enter into any buying, selling or bartering of goods, except in connection with any security given or held by it. warranted monetary statement

According to reports, HDFC Bank sold GPS devices bundling them with auto loans to achieve sale targets between the years 2015 and 2019. The cost of such devices was added to the loan amount.

Last July, HDFC Bank had conducted a probe into allegations of improper lending practices and conflicts of interests in its vehicle loan operation involving the unit’s former head Ashok Khanna. The investigations revealed personal misconduct by some of its employees and six of them were fired.

Also, last year, in September, US-based Rosen Law Firm and Schall Law Firm had filed class-action lawsuits against HDFC Bank, accusing the private lender of failing to reveal to investors about improper lending practices at its vehicle loans unit and making misleading statements.