The Reserve Bank of India imposed a total ₹2.91 crore on Axis and HDFC Bank for the errors in regulatory compliances. These fines underscore the significance of following appropriate operational guidelines, norms for customer support, and legal structures to preserve the honesty of financial frameworks.
Axis Bank had to give ₹1.91 crore
The RBI imposed ₹1.91 crore penalty on Axis Bank for violating rules under the Banking Regulation Act, revealed through the RBI’s comprehensive evaluation of the bank’s financial stability and operational principles as of March 31, 2023. Axis Bank was discovered to have created savings accounts for organizations that failed to satisfy the required criteria. This constitutes a clear breach of Know Your Customer (KYC) standards. The bank provided several customer identification numbers to people instead of the necessary Unique Customer Identification Code (UCIC). UCIC is essential for making sure each customer has a distinct code that aids in monitoring all transactions under a single identification, enhancing openness. The bank also broke rules about Agricultural Loans without Collateral. RBI stated that collateral is not required for agricultural loans that are less than ₹1.6 lakh. However, Axis Bank was discovered to have required collateral in certain instances. This is especially worrying because it impacts the least fortunate borrowers in the farming industry, who depend on these loans for their survival and way of life. Moreover, a branch of Axis Bank was discovered to be involved in providing technology services, which is prohibited for banking organisations.
The RBI explained that the fine was imposed due to Axis Bank’s non-compliance with these rules and instructions. Nonetheless, the central bank made it clear that this fine does not impact the legitimacy of transactions between Axis Bank and its clients, and additional measures might be implemented if needed.
HDFC Bank had to give ₹1 crore
HDFC Bank was penalized with a fine of Rs 1 crore for not adhering to guidelines concerning ‘Interest Rates on Deposits,’ ‘Recovery Agents Used by Banks,’ and ‘Customer Service in Banks’. The examination revealed multiple cases of not adhering to RBI guidelines.
This bank offered rewards to its account holders that went beyond ₹250, including paying for the initial year’s premium on life insurance policies. Such actions sparked worries regarding improper marketing tactics and possible clashes of interest. Similar to Axis Bank, HDFC Bank also created accounts for organizations that did not meet the criteria set by the regulatory rules, highlighting failures in adhering to the Know Your Customer (KYC) standards and the Interest Rate on Deposits regulations. Additionally, This bank didn’t follow the customer service norms that strictly prohibited contact with customers beyond permitted hours (before 7 am and after 7 pm). After reviewing HDFC Bank’s reply to the RBI’s alert, the fine was imposed to strengthen adherence to rules.
These penalties convey a powerful signal from the RBI regarding the significance of adhering to regulatory standards in the banking industry. Failure to follow set rules undermines the credibility of the banking framework, which relies on trust and openness. Although these fines have a monetary aspect, they also act as a caution for all banking entities to uphold superior operational practices, guaranteeing that the rights of customers and regulatory requirements are respected.