The Reserve Bank of India (RBI) has imposed penalties totalling Rs 2.91 crore on Axis Bank and HDFC Bank for lapses in statutory and regulatory compliance.

The RBI said a penalty of Rs 1.91 crore has been imposed on Axis Bank for violating certain provisions of the Banking Regulation Act and failing to adhere to regulations related to ‘Interest Rate on Deposits,’ ‘Know Your Customer (KYC)’ and ‘Credit Flow to Agriculture-Collateral Free Agricultural Loans.’

HDFC Bank was fined Rs 1 crore for non-compliance with certain directives on ‘interest rate on deposits,’ ‘recovery agents engaged by banks,’ and ‘customer service in banks.’

Regarding Axis Bank, the RBI’s supervisory evaluation, which reviewed the private lender’s financial position as of 31 March 2023, observed several compliance lapses. The RBI said the bank had opened certain savings deposit accounts in the name of ineligible entities. 

Also, it had allotted multiple customer identification codes to certain customers instead of a Unique Customer Identification Code (UCIC), and accepted collateral for agricultural loans up to Rs 1.60 lakh in some cases.

Further, a wholly owned subsidiary of Axis Bank was found to be engaged in technology services, a business not permitted for banking companies.

A notice was issued. After considering Axis Bank's reply to the notice, the RBI said charges against the bank were sustained, warranting imposition of monetary penalty.

In case of HDFC Bank, the RBI said a statutory inspection for supervisory evaluation of the bank was conducted with reference to its financial position as on 31 March 2022. Based on supervisory findings of non-compliance with RBI directions and related correspondence in that regard, a notice was issued to the bank.

After considering the HDFC Bank's reply to the notice, additional submissions made by it and oral submissions made during the personal hearing, the RBI found, inter alia, that the following charges against the bank were sustained, warranting imposition of monetary penalty, the RBI said.

The RBI said HDFC Bank gave gifts such as paying the first-year premium for complimentary life insurance cover, costing more than Rs 250 to the depositors at the time of account opening.

It opened certain savings deposit accounts in the name of ineligible entities, and failed to ensure that customers are not contacted after 7 pm and before 7 am.

The central bank, however, added that the penalties are based on deficiencies in statutory and regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the banks with their customers.