RBI Penalises HDFC Bank, Shriram Finance Over Regulatory Lapses

The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹4.88 lakh on HDFC Bank for non-compliance with regulations governing foreign investments in India. The contravention relates to the bank extending a term loan to a client without adhering to the stipulated Foreign Exchange Management Act (FEMA) provisions concerning foreign direct investment (FDI).

According to the RBI, the penalty follows a show cause notice issued to HDFC Bank. The bank provided a written response and made oral submissions during the hearing.

After examining the case and the bank's explanations, the RBI determined that the violation had occurred and justified the imposition of the penalty. The regulator clarified that this penalty is strictly for regulatory non-compliance and does not impact the validity of any transactions undertaken by the bank with its customers.

Penalty on Shriram Finance for Digital Lending Norm Violation

Separately, the RBI has levied a penalty of ₹2.70 lakh on Shriram Finance Limited for breaching provisions under the "Reserve Bank of India (Digital Lending) Directions, 2025". The violation surfaced during the RBI’s statutory inspection of the company’s financial records as of March 31, 2024.

One of the key charges sustained was that Shriram Finance routed loan repayments through a third-party account, instead of receiving payments directly from borrowers into the company’s designated account. This practice was deemed a violation of the RBI’s digital lending norms, which emphasize transparency and direct credit of funds.

Despite being given an opportunity to show cause and present additional submissions, the company was found guilty of non-compliance, leading to the penalty.

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Conclusion

The RBI reiterated that the penalties on HDFC Bank and Shriram Finance are due to deficiencies in regulatory compliance and are not intended to assess or affect the legal standing of any business agreements or transactions with clients. These enforcement actions reflect the central bank’s commitment to upholding strict adherence to regulatory norms in both traditional and digital lending sectors.

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