RBI Penalises HDFC Bank ₹91 Lakh for Non-Compliance in KYC, Outsourcing and Lending Norms

The Reserve Bank of India has imposed a monetary penalty of ₹91 lakh on HDFC Bank for violating key banking norms related to Know Your Customer (KYC), interest rate practices and outsourcing standards. This action follows a thorough supervisory inspection by RBI covering HDFC Bank's operations up to March 31, 2024. 

Multiple Regulation Breaches Found in Supervisory Review 

RBI’s Statutory Inspection for Supervisory Evaluation flagged significant lapses at HDFC Bank. These included the use of multiple benchmark rates for the same loan category and outsourcing of KYC compliance responsibilities to third-party agents.  

Moreover, a wholly owned subsidiary of the bank was found to be undertaking activities that are not allowed under Section 6 of the Banking Regulation Act. 

The penalty was issued on November 18, 2025, under Section 47A(1)(c) read with Section 46(4)(i) of the Banking Regulation Act, 1949. RBI took action after evaluating HDFC Bank’s response to the show-cause notice and any additional submissions offered. 

Violations Related to Loans, Subsidiary Activities and KYC 

One of the key violations observed was that HDFC Bank had adopted multiple benchmarks for loans under the same category, which contravenes the standardised interest rate guidelines. The bank also permitted a subsidiary to conduct business that is beyond the scope of activities authorised for banking companies. 

In addition, the central bank found that HDFC had outsourced the responsibility of determining customer compliance with KYC norms to external agents. This contravenes standard regulatory expectations, weakening the integrity and control processes expected within formal banking systems. 

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Penalty Specific to Compliance, Not Transactions 

RBI has clarified that the regulatory action is specific to procedural and compliance lapses. It does not question the legitimacy of any agreements or transactions conducted between the bank and its customers. The central bank has also kept the door open for further regulatory actions if required. 

Conclusion 

The ₹91 lakh fine imposed on HDFC Bank reinforces RBI’s commitment to enforcing compliance and operational standards. The issues flagged encompass lending practices, subsidiary operations and KYC norms, highlighting the importance of robust internal control mechanisms across India's banking sector. 

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