We are determined to strengthen process controls, says HDFC Bank chief Jagdishan
HDFC Bank’s bundling of vehicle tracking devices with car loans in the past was the result of “unscrupulous practices of a few people”, chief executive Sashidhar Jagdishan said, adding the whole episode has made everyone at India’s largest private bank commit to far greater process controls.
“I am personally determined to fix this,” Jagdishan said in the bank’s annual report for FY21.
Mint had reported on 20 July 2020 that car loan customers of HDFC Bank were forced to purchase a vehicle tracking device in a possible breach of guidelines prohibiting banks from doing non-financial businesses. HDFC Bank executives, Mint had reported, pushed auto loan customers to buy GPS devices worth ₹18,000-19,500 from 2015 to December 2019. The device in question was sold by Trackpoint GPS, a Mumbai-based firm.
“For many years, we had been bundling the financing of GPS systems and cars. The teams believed this was a routine lending activity. Also, 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,” he said.
“In November 2019, a whistleblower alleged that the vendor was incentivizing some of the employees in the auto loan team to bundle these products with our car loans and the bank immediately conducted an enquiry and on the basis of findings, took necessary actions,” he said.
Earlier this month, HDFC Bank said it will refund auto loan customers who had “availed of” a bundled GPS device between FY14 to FY20. This came after the Reserve Bank of India last month imposed a ₹10 crore fine on the lender for selling vehicle-tracking devices to its auto loan customers. RBI said that the decision was taken after an examination of documents pertaining to allegations of improper lending practices in its vehicle-financing operations.
“We accept this verdict and will comply with the directives,” Jagdishan said. According to him, business objectives should be driven keeping in mind the three Cs of culture, conscience and customers. “Customers are at the heart of everything we do. But every individual has to ask himself: Am I doing the right thing for the customer? Am I doing the right thing for the organization? Does my conscience permit this?” he added.
He added that at an organizational level, there is a greater focus on the role of credit, risk, compliance, audit and other enabling functions so the checks and balances get strengthened.
“Customers are the reason we exist, and our primary goal is to serve and delight them. We are proud of what we have achieved so far and understand that we have a long way to go in improving our customer experience as consumer behaviours and expectations are changing every day,” he added.
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