March 26th 2025.
In a recent development, the Reserve Bank of India has imposed a hefty fine of Rs 75 lakh on HDFC Bank, the largest private sector lender in the country. This action was taken as the bank failed to comply with the directions stated in the RBI's Know Your Customer (KYC) master direction, according to an official statement released on Wednesday.
After examining HDFC Bank's response to a showcause notice for violating norms and considering their additional submissions, the RBI found that the charges against the bank were indeed true and warranted the imposition of a monetary penalty. Upon further investigation, it was revealed that the bank did not properly categorize certain customers into low, medium, or high-risk categories based on their assessment and risk perception.
Moreover, the bank also assigned multiple customer identification codes to some customers instead of providing them with a unique customer identification code, as required by the RBI. This non-compliance was discovered during the statutory inspection of the bank conducted by the RBI as of March 31, 2023. As a result, a notice was issued to the bank, giving them an opportunity to explain why a penalty should not be imposed for their failure to comply with the stated directions.
The RBI clarified that this penalty is solely based on deficiencies in regulatory compliance and does not question the validity of any transaction or agreement made by the bank with its customers. It also stated that the monetary penalty does not affect any other possible actions that may be taken against the bank by the RBI.
In other news, HDFC Bank reported a 2.2% increase in standalone net profit for the third quarter of fiscal year 2025, amounting to Rs 16,736 crore. However, this was slightly lower than the previous quarter's figure of Rs 16,821 crore. The bank's interest earned also saw a 7.6% year-on-year growth to Rs 76,007 crore, while interest expenses rose by 7.7% to Rs 45,354 crore during the same period.
This penalty imposed by the RBI highlights the importance of banks complying with the regulatory directions to ensure the protection of their customers' interests and maintain the integrity of the banking system.
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