RBI fines HDFC Bank, Punjab & Sind Bank for up to Rs 75 lakh: Know reasons behind the penalties

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹75 lakh on HDFC Bank Limited for non-compliance with certain Know Your Customer (KYC) regulations. “The penalty was levied under Section 47A(1)(c) read with Section 46(4)(i) of the Banking Regulation Act, 1949,” according to the RBI press release, issued on 26 March 2025.

The RBI press release stated that the action follows the Statutory Inspection for Supervisory Evaluation (ISE 2023), which assessed HDFC Bank’s financial position as of March 31, 2023. “Based on supervisory findings of non-compliance with RBI directions and related correspondence in that regard, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said directions.”

KYC lapses

Upon reviewing the bank’s response and additional submissions, RBI found that HDFC Bank failed to categorise customers into low, medium, or high-risk groups based on risk assessment. Moreover, the bank allotted multiple customer identification codes instead of assigning a Unique Customer Identification Code (UCIC) to each customer.

While the penalty highlights regulatory deficiencies, RBI clarified that this action does not affect the validity of transactions or agreements between HDFC Bank and its customers. The central bank also noted that further actions could be taken if necessary.

This development highlights RBI’s ongoing efforts to enforce strict adherence to KYC norms, ensuring transparency and risk mitigation in the banking sector.

RBI has also imposed a ₹68.20 lakh penalty on Punjab & Sind Bank for failing to comply with key regulatory directives. The violations pertain to the reporting of large exposures under the Central Repository of Information on Large Credits (CRILC) and Financial Inclusion norms for Basic Savings Bank Deposit Accounts (BSBDA). RBI’s inspection found that the bank failed to report certain borrowers with exposures of ₹5 crore and above and allowed BSBDA holders to open savings accounts, violating norms. While the penalty highlights compliance deficiencies, RBI clarified that it does not affect the validity of customer transactions.

Moreover, RBI has imposed a monetary penalty of ₹10 lakh on KLM Axiva Finvest Limited for non-compliance with requirements relating to ‘Declaration of dividends’ contained in the RBI directions on ‘Reserve Bank of India (Non-Banking Financial Company – Scale Based Regulation) Directions, 2023’. The company declared a dividend for the financial year 2023-24, despite not meeting the minimum prudential requirements in each of the last three financial years.