The RBI has imposed a monetary penalty of ₹ 91 lakh on HDFC Bank for multiple regulatory violations identified during a supervisory inspection covering the bank’s financial position as of March 31, 2024.

Key Highlights

• RBI imposes ₹91 lakh penalty on HDFC Bank for KYC, outsourcing and benchmark-rate violations.
• Penalty follows inspection referencing March 31 2024, citing use of multiple loan benchmarks and prohibited subsidiary activity. 

According to the RBI, the bank contravened several provisions of the Banking Regulation Act, 1949 and failed to comply with key RBI directions related to interest rates on advances, outsourcing of financial services, and Know Your Customer (KYC) norms.

Key findings included the bank using multiple benchmark rates within the same loan category, a practice that undermines transparency and risks inconsistent customer outcomes. Additionally, the RBI found that HDFC Bank had outsourced the function of determining KYC compliance for certain customers to third-party agents, instead of retaining the compliance oversight in-house as required.

Another significant lapse concerned one of the bank’s wholly-owned subsidiaries: it was found to have engaged in business activities not permissible for banks under Section 6 of the Banking Regulation Act. Such ultra vires operations increase regulatory, legal, and reputational risk.

The penalty order, dated November 18, 2025, was issued after the RBI’s Statutory Inspection for Supervisory Evaluation, followed by a show-cause notice and consideration of the bank’s replies and additional submissions.

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In its statement, the RBI stressed that this action addresses procedural and compliance deficiencies—it does not call into question the legality of any customer transactions or contracts the bank entered into. It also made clear that this penalty is “without prejudice to any other action which may be initiated” against HDFC Bank.

The case highlights how regulatory oversight continues to focus on operational integrity in areas such as KYC, benchmarking practices, and outsourcing governance—areas critical for maintaining trust in the banking system.