HDFC clears air on auto loan-GPS bundling | Economic Times

HDFC Bank has defended itself through an in-person hearing against allegations of wrongdoing in response to a central bank show-cause notice on GPS (global positioning system) instruments being bundled with the lender’s auto loan product.HDFC Bank has argued that the issue in question has had no impact on the bank’s balance sheet in any way but was an action by some people who, together with the GPS vendor, may have made some gains, two people familiar with the issue told ET. The bank had sought an in-person hearing to make its point and show the action taken on the incident. The in-person hearing with the Reserve Bank of India (RBI) was completed earlier this month.“The RBI had sent the bank a show-cause notice a few months ago to which HDFC Bank had replied and asked for an in-person hearing,” said one of the two people cited above. “The bank has argued that the said issue with regards to the GPS system has not impacted the bank's balance sheet in any way. It was the action of some people who together with the vendor may have made some gains. These people are no longer with the bank and the bank has taken the necessary corrective action.”Five regional managers and two central officials were sacked after an enquiry that found some links with the vendor, this person said, acknowledging that the bank had found indirect and in some cases direct evidence of impropriety. 81576153The GPS issue came to light in July last year after Bloomberg reported that HDFC Bank’s former group head of vehicle loans was denied a third extension, mainly due to a probe linked to this product. The executive Ashok Khanna retired in March 2020 and has denied allegations that his retirement was linked to the probe.Some HDFC Bank staff members are said to have forced customers to buy the GPS devices, bundling them with their loans from the bank without their knowledge for a fee. This was against the RBI guidelines preventing banks from bundling loans with non-financial products. The bank had a tie-up with Mumbai based Trackpoint GPS to sell these devices. It is unclear if the tie-up still exists. HDFC Bank did not reply to an email seeking comment.“The bank expects the RBI to come out with some penal action in the next few days, most likely a fine, because the fees earned by the bank by selling this product are in contrast to the regulations and can cause problems,” the person cited above said.HDFC Bank is a market leader in auto loans among banks. With a loan book of ₹81,880 crore as of December 2020, auto financing is the second largest in the bank’s retail loan portfolio.RBI TO AUDIT DIGITAL FAILURESMeanwhile, in another unrelated case concerning the bank, Mumbai-based AAA Technologies has been appointed by the RBI to conduct an audit of information technology (IT) and digital banking systems after multiple failures in regards to digital services and payments systems, the latest one being on November 21.AAA will submit its report to the RBI on whether the bank has fixed the issues. The audit report will form the basis for the central bank to lift operational curbs on HDFC Bank.