RBI slaps Rs 10 cr fine on HDFC Bank over violations in auto loan portfolio

The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs 10 crore on country’s largest private sector lender HDFC Bank for violating regulatory compliance in auto loan portfolio. 

The RBI in its statement said, upon examining the documents in the matter of marketing and sale of third-party non-financial products to the banks’ customers, it found that the bank was in contravention of the provisions of section 6(2) and section 8 of the Banking Regulation Act, 1949. 

The RBI acted on the matter after it received a whistleblower complaint regarding the irregularities in the auto loan portfolio of the bank. 

RBI issued a notice to the bank asking why a penalty should not be imposed on the bank for violating certain rules. “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, RBI came to the conclusion that the aforesaid charge of contravention of provisions of the Act was substantiated and warranted imposition of monetary penalty”, RBI said. 

It was alleged that HDFC Bank was misselling GPS products to its auto loan customers. The cost of such devices was added to the loan amount, thereby  The bank conducted an internal enquiry into the matter and had stated that appropriate action was taken against individuals involved in that division of the bank. 

According to the allegations, executives of the bank sold GPS devices bundling them with auto loans to achieve sale targets between the years 2015 and 2019. 

Also, last year, in September, US-based Rosen Law Firm and Schall Law Firm had filed class-action lawsuits against HDFC Bank, accusing the private lender of failing to reveal to investors about improper lending practices at its vehicle loans unit and making misleading statements. The lawsuit also named Aditya Puri, the erstwhile MD& CEO of the bank,  Sashidhar Jagdishan, the current MD& CEO, and company secretary Santosh Haldankar.