The Reserve Bank on Friday said it has imposed a Rs 4.88 lakh penalty on HDFC Bank for contravention of certain norms relating to foreign investment in India while granting a term loan to its client. The central bank also imposed a penalty of Rs 2.70 lakh on Shriram Finance Limited for non-compliance with certain provisions of the “Reserve Bank of India (Digital Lending) Directions, 2025”. Regarding the penalty on authorised dealer bank – HDFC Bank, the RBI said it had issued a show cause notice to the bank, in response to which the bank had submitted a written reply and had also made oral submissions thereon. “After considering the facts of the case and the response given by HDFC Bank Ltd in the matter, the Reserve Bank of India came to the conclusion that the contraventions were established and warranted imposition of penalty,” RBI said. The statutory inspection of Shriram Finance was conducted by RBI with reference to its financial position as on March 31, 2024. Based on supervisory findings of non-compliance with RBI directions and related correspondence in that regard, a notice was issued to the company advising it to show cause as to why penalty should not be imposed on it for its failure to comply with the said directions. After considering the company’s reply to the notice, additional submissions made by it and oral submissions made during the personal hearing, RBI said it found, inter alia, that the following charge against the company was sustained, warranting imposition of monetary penalty. The company routed the loan repayments through the account of a third-party, instead of the borrowers directly crediting the loan repayments to the company’s account, the RBI said. In both cases, the central bank said the penalties are based on the deficiencies in regulatory compliance and not intended to pronounce upon the validity of any transaction or agreement entered into by the entities with their customers.