The Reserve Bank of India (RBI) levied hefty fines on Axis Bank and HDFC Bank for lapses in regulatory, as well as statutory compliance, on September 10.

RBI reportedly slapped a penalty of ₹1.91 crore on Axis Bank for breaching provisions of the Banking Regulation Act and failing to comply with guidelines regarding ‘Interest Rate on Deposits’, ‘Know Your Customer (KYC)’, and ‘Credit Flow to Agriculture-Collateral Free Agricultural Loans’. Meanwhile, HDFC Bank was fined ₹1 crore for not adhering to rules related to ‘interest rate on deposits’, ‘recovery agents employed by banks’, and ‘customer service in banks’.

Reports stated that these lapses were notified by the RBI through a public statement, which also mentioned that their investigation into Axis Bank, which focused on its financial position as of March 31, 2023, uncovered “multiple compliance failures”.

Axis Bank had opened savings accounts for ineligible entities and issued multiple customer identification codes instead of assigning a Unique Customer Identification Code (UCIC) to each individual, RBI established, as per reports.

Additionally, the bank was reportedly found to have taken collateral for agricultural loans under ₹1.60 lakh, violating regulatory norms.

A subsidiary of Axis Bank was also conducting activities as a technology service provider, a business outside the scope of what a banking entity is permitted to undertake, added reports.

HDFC Bank fined by RBI

The RBI conducted a similar inspection for HDFC Bank based on its financial position as of March 31, 2022, which revealed that the bank violated regulations by offering gifts, such as paying for the first-year premium of life insurance policies, valued at more than ₹250 to depositors.

It also opened savings accounts for entities that were not eligible, as well as failed to comply with the RBI’s directive that customers should not be contacted outside the hours of 7 pm and 7 am.

Despite these penalties, the RBI clarified that the fines are strictly related to deficiencies in statutory and regulatory adherence and are not a reflection of the legitimacy of the banks’ transactions or agreements with customers.