monetary penalty on HDFC Bank

RBI has imposed a monetary penalty of Rs.100 million for contravention of section 6(2) and 8 of the Banking Regulation Act, 1949. As usual the press release gives very scant details as to the non compliance involved.

Section 6(2) specifies that no banking company shall engage in any form of business other than that referred to in section 6(1).

Section 6(1) specifies what kinds of business that a banking company can carry out in India. It is a very inclusive definition leaving no scope for banking companies to do any other business other than those specified in this section.

Section 8 specifies that no banking company shall indulge in any buying or selling or bartering of goods or engage in any trade other than in connection with realisation of security held by it or in connection with bills of exchange received for collection or negotiation.

From newspaper reports, it appears that HDFC Bank has indulged in cross selling of products of third party in its auto loan section.

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