“The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs 10 crore on HDFC Bank Limited (the bank) for contravention of provisions of section 6(2) and section 8 of the Banking Regulation Act, 1949 (the Act),” RBI said in its release.
The irregularities in the auto loan portfolio pertains to the charges including bank’s executives forcing the borrowers to buy GPS devices bundled with the auto loans and even insisting that loans will not be sanctioned unless they buy these devices.
Last year it was revealed that some employees at the auto loans department allegedly forced customers to buy GPS devices bundled with car loans. It was found that some customers were not even aware of purchasing such a product till the loan documents were checked.
These errant employees started forcefully bundling the GPS devices with car loans to meet sales targets and potentially track borrowers in the event of a default.
“This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.” read the statement from the Central Bank.
An examination of documents in the matter of marketing and sale of third-party non-financial products to the bank’s customers, arising from a whistle blower complaint to RBI regarding irregularities in the auto loan portfolio of the bank, revealed contravention of the aforesaid provisions of the Act and the regulatory directions, the RBI said.