RBI fines HDFC Bank ₹1 crore for non-compliance of KYC norms

The Reserve Bank of India (RBI) on Wednesday said it has imposed a penalty of ₹1 crore on HDFC Bank for non-compliance with its know your customer (KYC) norms.

"This action is based on the 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," it said in a press release on its website.

According to the regulator, based on the observations made during the on-site Inspection for Supervisory Evaluation of the bank undertaken by RBI for the financial year ended 31 March, 2017, a scrutiny of 39 current accounts opened by its customers for bidding in Initial Public Offer (IPO) was conducted.

This scrutiny, RBI said, revealed that the bank had failed to exercise ongoing due diligence in those accounts.

"It was observed that the transactions effected in these current accounts were disproportionate to the declared income and profile of the customers," said RBI.

On the basis of the findings, the central bank said it issued to the bank to show cause as to why penalty should not be imposed for non-compliance with the direction.

"After considering the reply received from the bank and oral submissions made in the personal hearing, RBI came to the conclusion that the aforesaid charge of non-compliance with the direction was sustained and warranted imposition of monetary penalty," it said.

RBI added that it has imposed the penalty in exercise of powers under the provisions of section 47 A (1) (c) read with section 46 (4) (i) of the Banking Regulation Act, 1949, taking into account the failure of the bank to adhere to the direction issued by RBI.

The private lender was in the news recently when in December a disruption of its online banking services affected scores of customers. RBI deputy governor M.K. Jain had said in December that the regulator has taken into account the outage and has deployed a team of experts to investigate into the matter. The bank has, since, clarified that the outage was not owing to any cyberattack but because the lender ‘underestimated’ growth in payment volumes.

Meanwhile, the bank is also in the midst of finding a successor to its longest-serving chief Aditya Puri whose term ends on 26 October.