The Reserve Bank of India (RBI) has imposed a monetary penalty of ₹91 lakh on HDFC Bank for regulatory non-compliance. Announced on November 28, 2025, this action stems from internal procedural lapses found during RBI’s 2024 inspection of the bank.
Why Was HDFC Bank Penalized?
1. Multiple Benchmarks for Loans
HDFC Bank was found using different benchmark rates within the same category of loans, violating RBI guidelines that demand consistency to ensure transparency and fairness for borrowers.
2. Impermissible Subsidiary Business
A wholly owned subsidiary of the bank was engaged in business activities not allowed under Section 6 of the Banking Regulation Act, 1949. These rules strictly define what banks and their subsidiaries can legally do.
3. Outsourced KYC Compliance
The bank had outsourced the responsibility of verifying Know Your Customer (KYC) compliance for some customers to external agents. RBI regulations require banks to maintain full control over KYC processes to avoid risks like identity fraud or money laundering.
Understanding the Legal Sections: Section 6 and Section 19
Section 6 – What Banks Can Do
This section outlines all the activities a bank is legally allowed to undertake, such as accepting deposits, lending money, trading in securities, and offering payment services. Anything outside this list requires special permission from the RBI.
Section 19 – Subsidiary Regulations
Section 19 ensures banks form subsidiaries only for permissible business activities. It also limits how much equity a bank can hold in other companies to prevent conflicts of interest and maintain financial stability.
RBI’s Clarification: Customer Transactions Are Safe
The RBI made it clear that the penalty imposed on HDFC Bank is not a reflection on any customer transaction. Your accounts, loans, and other dealings with the bank remain valid and secure. The action focuses solely on the bank’s internal compliance mechanisms.
Other Recent RBI Penalties
This is part of a broader regulatory trend. In April and May 2025, RBI penalized several banks including ICICI Bank, Axis Bank, Kotak Mahindra Bank, and Punjab National Bank for similar compliance lapses. These actions underline RBI’s commitment to maintaining discipline and safeguarding customer interests in the banking system.
Conclusion
While the ₹91 lakh penalty on HDFC Bank may sound alarming, it pertains strictly to regulatory and procedural shortcomings. Your relationship with the bank remains unaffected. These RBI actions aim to ensure banks operate transparently and within legal boundaries, ultimately benefiting every account holder in India.
