The apex bank of the country Reserve Bank of India (RBI) had imposed a monetary penalty of Rs 10 crore on the HDFC Bank on Friday.
This is for the violation of provisions of section 6(2) and section 8 of the Banking Regulation Act, 1949 (the Act). Section 8 of the Banking Regulation Act states that a bank cannot directly or indirectly deal with buying, selling, or bartering of goods. However, a bank may barter the transactions relating to bills of exchange received for collection or negotiation.
This comes after a whistle blower complaint to the RBI, regarding irregularities in the auto loan portfolio of the bank, revealed violation of the above-mentioned provisions of the Banking Regulation Act.
After further examination to bank's reply to the show cause notice, the oral submissions made during the personal hearing, as well as scrutiny of further clarifications or documents furnished by the bank, it was concluded that the above provisions of the Banking Regulation Act was violated which led to imposition of penalty.
The central bank said in a statement today that “this action is based on the deficits in regulatory compliance and is not intended to pronounce upon the validity of any transaction or an agreement entered into by the bank with its customers.”
This penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47A(1)(c), with Section 46(4)(i) of the Act.