The Reserve Bank of India (RBI) has penalized Rs.1 crore penalty on HDFC for violating know-your-customer(KYC) norms in 39 accounts. The Central Bank said that those 39 current accounts opened by HDFC had transactions disproportionate to the declared income and profile of the customers.
“Based on the observations made during the on-site inspection for FY17, scrutiny of 39 current accounts opened by its customers for bidding in the initial public offer was conducted by the RBI, which revealed that the bank had failed to exercise ongoing due diligence in those accounts,” the central bank said.
As a result, the RBI had issued a show cause notice to HDFC Bank, asking the bank why they should not be penalized for this lapse on their part. And, after taking into consideration the bank’s response, the Reserve Bank of India concluded that the charge of non-compliance with the direction was sustained and warranted imposition of monetary policy. Thus, the RBI went ahead and imposed a fine of Rs.1 crore on HDFC Bank. Moreover, the latter was allowed to send its representative to make oral submission also, before pronouncing the verdict.
However, the Central Bank of India clears that finding HDFC Bank non-compliant in this particular case does not mean that the transactions held in those accounts are not valid. Any agreement or understanding the bank would have entered into with the 39 current account holders remains unaffected as well.
The objective behind imposing this fine is to ensure that banks do not take the KYC compliance lightly and also to stop the money laundering activities. Following the rules, in last year July also, the RBI had fined a list of public sector banks for KYC norms violation.