The Reserve Bank of India (RBI) has imposed a penalty of Rs 10 crore on HDFC Bank for bundling a non-financial product like a GPS tracking device from a specified seller along with its car loan. This is perhaps the first time that a bank is getting fined for sanctioning car loans which are bundled with the procurement of a GPS device.
This also happens to be the largest fine on HDFC Bank. Earlier, in 2020, the bank had been fined Rs 1 crore for non-compliance with KYC (know your customer) norms for 39 accounts. In 2013, the bank was fined Rs 4.5 crore for failing to comply with KYC norms.
“An examination of documents in the matter of marketing and sale of third-party non-financial products to the bank’s customers, arising from a whistle blower complaint to RBI regarding irregularities in the auto loan portfolio of the bank, revealed, inter alia, contravention of the afore-said provisions of the Act and the regulatory directions,” the central bank said.
The RBI issued a notice to HDFC Bank advising it to show cause as to why penalty should not be imposed for contravention of the provisions of the Act/directions.
After considering the bank’s reply to the show cause notice, oral submissions made during the personal hearing and examination of further clarifications/documents furnished by the bank, the RBI “came to the conclusion that the aforesaid charge of contravention of provisions of the Act was substantiated and warranted imposition of monetary penalty”.
This action is based on 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, the RBI said.
After the whistle blower complaint last year, six employees were sacked. Ashok Khanna, head of the bank’s vehicle loan business, also stepped down. The allegations of car loans being bundled with an expensive GPS device from a particular seller first surfaced on social media. After a sustained social media campaign, the bank was forced to respond. Aditya Puri, the then managing director and CEO of the bank, acknowledged the issue and said that an internal probe was conducted against a few erring employees.
