Actions including termination of certain employees’ services and arrangement with the vendor were taken," the bank's annual report for 2020-21 said.
HDFC bank's new managing director and chief executive officer (CEO) Sashidhar Jagdishan has clarified that necessary action was taken concerning the auto loan-GPS bundling controversy.
"We conducted a probe and took necessary actions based on its findings. Actions including termination of certain employees’ services and arrangement with the vendor were taken," the bank's annual report for 2020-21 said.
Jagdishan added that the bank will comply with the norms laid down by the Reserve Bank of India and pay the Rs 10 crore penalty. "We have been asked to pay a penalty of Rs 10 crore and have also been instructed to repay the commission that we earned from the process to the customers. We accept this verdict and will comply with the directives," he said.
Car loan customers of the HDFC Bank were “forced” to purchase a vehicle tracking device between 2015 and 2019. The issue was flagged by a whistleblower in 2019 who added that the practice breaches section 6(2) and section 8 of the Banking Regulation Act of 1949, which prohibits banks from carrying out non-financial businesses. These GPS devices, sold by Trackpoint GPS, a Mumbai-based company, were priced at Rs 20,000.
Issuing a clarification on the issue, Jagdishan said, "For many years, we had been bundling the financing of GPS systems and cars. The teams believed this was a routine lending activity. A particular vendor had entered into an arrangement with us directly. These products were never sold on a standalone basis but only bundled along with the purchase of cars."
The bank's former MD & CEO Aditya Puri had in July 2020 said they received some 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 said while addressing an earnings conference call.
He, however, 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."