HDFC Bank said that it would refund the GPS device commission to all its auto loan customers who availed it between 2013-14 and 2019-20. The move comes after RBI imposed a penalty of Rs 10 crore on the private lender over irregularities found in its auto loan portfolio.
The country’s top private lender HDFC Bank on Thursday said it would refund the GPS device commission to all its auto loan customers who had availed of the device as part of loans taken between financial years 2013-14 and 2019-20.
In a public notice issued in newspapers, HDFC Bank said, “Notice is hereby given that HDFC Bank Limited (Bank) will be refunding the GPS device commission to auto loan customers who availed of such device as a part of the auto loan funding during the period FY 2013-14 to FY 2019-20. The refund will be credited to the customer's repayment bank account as registered with the bank.”
The monetary hit for refunding these customers may be very small for a large bank like HDFC Bank. “The GPS device commission refund amount is approximately Rs 40-45 crore only,” said a person in the know.
According to people familiar with the matter, the whistle-blower complaint had alleged that HDFC Bank’s car loan customers were given GPS devices bundled as part of the auto without their knowledge. This is in violation of the Banking Regulation Act guidelines, which prohibit banks from indulging in non-financial business, among others.
According to the whistle-blower allegations, executives involved in these dealings sold the GPS devices to achieve sales targets during the period. HDFC Bank is understood to have tied up with a firm called “Trackpoint GPS” for these devices, it was alleged.
The action was taken after the regulator conducted an investigation into a whistle-blower complaint alleging misdeeds in the bank’s auto loan portfolio.
“An examination of documents in the matter of marketing and sale of third-party non-financial products to the bank’s customers, arising from a whistle blower complaint to RBI regarding irregularities in the auto loan portfolio of the bank, revealed, inter alia, contravention of the afore-said provisions (section 6(2) and section 8) of the (Banking Regulation Act, 1949) Act and the regulatory directions," RBI said in a notification on May 28.
Addressing the issue in an earnings concall in July last year, the bank’s former MD and CEO Aditya Puri had said, “ We had received some whistleblowing complaints. Internal inquires carried out in the matter on the complaint received have not brought out any conflict-of-interest issue, nor does it have any bearing on our loan portfolio.”
He added, “The inquiry did bring out other aspects related to personal misconduct exhibited by a set of employees, for which appropriate disciplinary actions have been initiated or taken.”
Five regional managers and two central officials were fired after an internal inquiry into the matter by HDFC Bank found evidence of impropriety and links with the vendor, reports have suggested.