Summary of this article
RBI fines HDFC Bank for regulatory compliance lapses.
Bank used inconsistent benchmarks across similar loan categories.
KYC checks outsourcing and subsidiary activity breached norms.
The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs 91 lakh on HDFC Bank for non-compliance with the provisions of the Banking Regulation Act, 1949, and also for failing to adhere to certain regulatory guidelines. The order was issued on November 18, 2025, after the regulator completed its supervisory review of the bank's operations, RBI announced in a statement issued on November 28, 2025.
Nature Of The Violations
The fine is connected with contraventions of section 19(1)(a) read with section 6(1) of the Banking Regulation Act and non-compliance with directions covering interest rates on advances, outsourcing of financial services, and know-your-customer norms. In other words, these rules form a core part of how banks are expected to operate, especially with regard to lending, customer verification, and the use of outside vendors.
The move follows the statutory inspection for supervisory evaluation by the central bank for the financial year ending March 31, 2024.
Through the inspection, the regulator observed various discrepancies in the bank’s compliance with the framework under the Act and the directions. A show-cause notice was issued to the bank, asking it to show why a penalty should not be imposed. The bank replied and also made some additional submissions, which were looked into before arriving at the decision on the penalty.
Key Findings
The regulator pointed out three major areas of concern. First, the bank had used multiple benchmarks within the same category of loans. This constitutes a significant deviation from prescribed standards, as loan pricing must follow uniform benchmarks across each category of loan.
Second, a fully-owned subsidiary of the bank was discovered to have engaged in an activity not allowed under Section 6 of the Act for banks to undertake; this is a list of permitted businesses that banks can legally operate in; activities outside this list are not allowed.
Third, the bank had outsourced verification of compliance with know-your-customer (KYC) norms for some customers to external agents. While outsourcing is permitted under certain conditions, the responsibility of due diligence and regulatory compliance cannot be delegated.
Clarification by RBI
The central bank said the penalty reflects inadequate compliance with regulations and does not call into question the validity of any transactions or arrangements between the bank and its clients. It also explained that the measure does not preclude the regulator from taking further action where necessary.
