The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹75 lakh on HDFC Bank Limited for failing to comply with Know Your Customer (KYC) norms. The penalty was issued under Section 47A(1)(c) read with Section 46(4)(i) of the Banking Regulation Act, 1949.
Why Was the Penalty Imposed?
RBI conducted a Statutory Inspection for Supervisory Evaluation (ISE 2023) based on HDFC Bank’s financial position as of March 31, 2023. During this inspection, violations of RBI’s KYC guidelines were identified. The following key deficiencies led to the penalty:
- Failure to Categorize Customers by Risk Level – The bank did not classify certain customers into low, medium, or high-risk categories based on its internal assessment and risk perception, which is a critical requirement for preventing money laundering and fraud.
- Issuance of Multiple Customer Identification Codes – The bank assigned multiple Customer Identification Codes to some customers instead of maintaining a Unique Customer Identification Code (UCIC) for each customer. This could lead to inconsistencies in customer records and potential compliance risks.
RBI’s Investigation and Decision
After detecting these violations, RBI issued a show-cause notice to HDFC Bank, asking for an explanation. The bank provided its reply and additional submissions, but RBI found the charges valid, justifying the imposition of the penalty.
Clarification from RBI
RBI clarified that the penalty is based on regulatory compliance deficiencies and does not affect the validity of any customer transactions or agreements with the bank. Additionally, this penalty does not prevent RBI from taking further actions if necessary.
This penalty highlights the importance of strict KYC compliance in the banking sector and reinforces RBI’s commitment to ensuring that banks follow robust risk assessment and customer identification procedures to maintain transparency and prevent financial irregularities.
