Amid the controversy around "improper lending practices" at HDFC Bank Ltd's vehicle finance unit, the Reserve Bank of India has taken cognisance of the matter, seeking details of the internal probe conducted by the bank. The apex bank has also sought details of the steps taken by the lender in addressing the issues that emerged during the probe, BloombergQuint reported.
Notably, HDFC Managing Director Aditya Puri had said last Saturday that a whistle-blower had flagged issues of "personal misconduct" by some of the employees and that based on the internal probe findings, suitable action was taken by the lender's management.
With regard to the probe, HDFC Bank has fired at least six senior and mid-level officials. Some employees of auto loan unit allegedly breached the code of conduct and governance rules and indulged in corrupt practices, following which they were sacked by the bank's unit.
The probe found that lender's car loan customers were given GPS devices by bundling them in auto loans without their knowledge, thereby violating the guidelines prohibiting them to indulge in non-financial businesses.
As per the allegations, these executives sold the GPS devices with auto loans to achieve sales targets from the years 2015 to 2019, and allegedly to track customers in case of loan default. A GPS device costs around Rs 18,000-Rs 19,500. The bank had tied up with a Mumbai-based firm Trackpoint GPS to offer these devices to its customers, The Economic Times reported.
The vehicle financing unit of HDFC Bank has total outstanding loans of Rs 1.2 lakh crore as of March 31, 2020.
Although details regarding the probe have not yet been made public, the tenure of Ashok Khanna, who worked at the bank for around 18 years and headed the crucial unit that accounted for around 10 per cent of the lender's loan book, was not extended despite an earlier proposal to do so.
Earlier, the HDFC Bank management was mulling over increasing Khanna's tenure by at least six months until October. The decision was reportedly being considered to ensure smooth continuity ahead of the retirement of HDFC Bank Managing Director Aditya Puri.
However, 63-year-old Khanna retired from the bank as per the contract in March. Notably, Khanna, who was due to retire in 2017, had been receiving an extension, primarily due to the importance of his unit.
Meanwhile, HDFC Bank's shares were trading Rs 9.20 or 0.82 per cent up at Rs 1,135.55 on Thursday, compared to its previous day close of Rs 1,126.35 on the National Stock Exchange (NSE).