In a major setback, the Reserve Bank of India (RBI) has slapped a massive penalties on India's largest private bank, HDFC Bank due to violations of KYC norms. HDFC Bank was not alone, a PSU lender backed by PNB, aka Punjab & Sind Bank also faced monetary penalties. Accordingly, HDFC Bank and Punjab & Sind Bank's share prices will be in focus on Thursday.
HDFC Bank:
RBI imposed a Rs 75 lakh monetary penalty on March 24 on HDFC Bank due to non-compliance with certain directions issued by RBI on 'Know Your Customer (KYC)'. The penalty is levied in the exercise of powers conferred on RBI under the provisions of Section 47A(1)(c) read with Section 46(4)(i) of the Banking Regulation Act, 1949.
The penalty comes after RBI conducted a Statutory Inspection for Supervisory Evaluation (ISE 2023) of the bank with reference to its financial position for the fiscal year ending, March 31, 2023.
Based on supervisory findings of non-compliance with RBI directions and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said directions, as per RBI.
RBI sent a notice to HDFC Bank for its reply along with additional submissions. After HDFC Bank's response, RBI found that following charges against the bank were sustained, warranting imposition of monetary penalty:
- The bank did not categorise certain customers into low, medium or high risk category based on its assessment and risk perception; and
- The bank allotted multiple customer identification code to certain customers instead of a Unique Customer ldentification Code (UCIC) for each customer.
RBI said, "This action is based on 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. Further, imposition of monetary penalty is without prejudice to any other action that may be initiated by RBI against the bank."
HDFC Bank was incorporated in August 1994 in the name of HDFC Bank Limited, with its registered office in Mumbai, India. The bank commenced operations as a Scheduled Commercial Bank in January 1995.
As of December 31, 2024, the Bank's distribution network was at 9,143 branches and 21,049 ATMs across 4,101 cities / towns as against 8,091 branches and 20,688 ATMs across 3,872 cities / towns as of December 31, 2023. 51% of its branches are in semiurban and rural areas. The Bank's international operations comprises four branches in Hong Kong, Bahrain, Dubai and an IFSC Banking Unit (IBU) in Gujarat International Finance Tech City. It has five representative offices in Kenya, Abu Dhabi, Dubai, London and Singapore.
Punjab & Sind Bank:
RBI slapped Rs 68.20 lakh penalty on Punjab & Sind Bank for non-compliance with certain directions issued by RBI on 'Creation of a Central Repository of Large Common Exposures - Across Banks' read with 'Central Repository of lnformation on Large Credits (CRlLC) - Revision in Reporting' and 'Financial Inclusion - Access to Banking Services - Basic Savings Bank Deposit Account (BSBDA)'.
The central bank also carried a Statutory Inspection for Supervisory Evaluation (ISE 2023) of the bank with reference to its financial position as on March 31, 2023.
After the response from Punjab & Sind Bank, RBI found that the following charges against the bank were sustained, warranting imposition of monetary penalty:
- The bank did not report certain borrowers with non-fund based exposure of ₹5 crore and above to CRILC; and
- The bank allowed certain BSBDA holders to open Savings Bank Deposit Accounts.
Punjab and Sind Bank was established in the year 1908, and is a pacemaker in the banking space. It is also a full-service digital bank, empowering millions of people across the length and breadth of the country to access its products and services. With over 10,000+ employees in the country, Punjab and Sind Bank is an up-structured and growing organization. It has 1559 branches overall, spread widely across India. Punjab and Sind Bank provide customer service through innovative products and services for different customer segments.
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