The Reserve Bank of India (RBI) imposed monetary penalties on HDFC Bank and Punjab & Sind Bank for failing to comply with regulatory guidelines, an official statement released by the central bank on Wednesday showed.

HDFC Bank has been fined Rs 75 lakh for violations related to Know Your Customer (KYC) norms, while Punjab & Sind Bank faces a Rs 68.2 lakh penalty for non-compliance with large exposure reporting and basic savings account maintenance rules, reported Business Standard.

RBI explained that the penalty on HDFC Bank followed a statutory inspection conducted based on the bank’s financial position as of March 31, 2023. During the review, supervisory findings indicated non-compliance with RBI directives.

Consequently, the bank was issued a notice asking it to justify why it should not face penalties for its lapses. Despite HDFC Bank’s response and additional submissions, the central bank identified discrepancies, leading to the imposition of a monetary penalty.

Regulatory Lapses Committed By HDFC Bank 

One key violation by HDFC Bank was its failure to categorise certain customers into low, medium, or high-risk categories based on risk perception, as mandated by RBI guidelines.

Additionally, the bank assigned multiple customer identification codes instead of a Unique Customer Identification Code (UCIC) for each customer, contravening regulatory instructions.

RBI clarified that the penalty is based solely on deficiencies in regulatory compliance and does not impact the validity of any transactions or agreements the bank has with its customers. "Further, imposition of a monetary penalty is without prejudice to any other action that may be initiated by RBI against the bank," the central bank said.

Punjab & Sind Bank Penalised for Reporting and Compliance Failures

In a separate order, RBI also levied a Rs 68.2 lakh penalty on Punjab & Sind Bank for failing to comply with guidelines on the ‘Creation of a Central Repository of Large Common Exposures – Across Banks’ and ‘Financial Inclusion - Access to Banking Services – Basic Savings Bank Deposit Account (BSBDA).’

As per RBI’s findings, Punjab & Sind Bank failed to report certain borrowers with non-fund-based exposure of Rs 5 crore and above to the Central Repository of Information on Large Credits (CRILC), violating RBI norms. Additionally, the bank permitted some BSBDA holders to open Savings Bank Deposit Accounts, which goes against RBI’s financial inclusion guidelines.