RBI Fines HDFC Bank Rs 4.88 Lakh for Violation of Foreign Investment Rules
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The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹4.88 lakh on HDFC Bank Ltd. for violating rules related to foreign investment.
According to the RBI, the penalty has been imposed under Section 11(3) of the Foreign Exchange Management Act (FEMA), 1999. The violation occurred when HDFC Bank granted a term loan to one of its clients, which was found to be in contravention of the RBI’s Master Direction on Foreign Investment in India, issued on January 4, 2018. Specifically, the bank failed to follow the guidelines mentioned in Paragraph 9.3.6 of the direction.
The RBI had earlier sent a Show Cause Notice to the bank, asking it to explain why action should not be taken. HDFC Bank responded with a written reply and also gave oral submissions during the inquiry.
After reviewing the bank’s explanations and examining the case in detail, the RBI concluded that the bank had indeed violated the rules. As a result, it decided to impose the monetary penalty.
The RBI clarified that this penalty is related only to issues in regulatory compliance. It does not question the validity of the actual loan or any agreement between HDFC Bank and its customer.