HDFC Bank Fires Employees For Forcing Car-Loan Customers To Buy GPS Machine
Yesterday, we covered the story of how HDFC bank had pushed the borrowers for 4 years to buy a GPS device costing Rs 18,000-19,500 along with the car loan amount. The bank had said it will take appropriate measures, and they have been taken after issuing an internal probe.
Now the lender has fired at least 6 senior and mid-level executives after the probe revealed that they violated the code of conduct and governance standards by indulging in practices seen as corrupt, said three people familiar with the matter.
Read on to find out more…
HDFC Bank Fails To Spot the Misdoing For 4 Years!
HDFC Bank is the largest vehicle finance provider. It provides at least 50,000-55,000 car loans every month and has an annual business worth at least Rs 40,000 crore.
At the end of June 2020, the lender’s car loan book stood at Rs 81,082 crore against Rs 81,913 crore during the same period in 2019. This constituted 17% of its retail loans.
The termination in question concerns the staff of the auto loan department.
Last week, a Bloomberg report stated that Ashok Khanna, former group head of secured vehicle loans after getting two post-retirement extensions had been denied an extension after a probe was launched into its vehicle loan book. He left the bank in March, 2020.
The investigation revealed that some customers were not even aware of the purchase. They found out when the loan documents were checked.
The now terminated employees to meet the sales targets had started forcefully pushing these products with car loans. Apparently this was also done to potentially track borrowers in the event of a default.
The HDFC Bank has a deal with a Mumbai-based firm, Trackpoint GPS to sell their vehicle tracking devices.
An official with a know in the matter said, “This is a bank approved product, it’s quite a minuscule portion of the banks portfolio, hardly 4000-5000 of these devices costing Rs 18,000-19,000 each were sold every month.” He added, “The gross failure for the bank has been its audit which failed to spot the misdoing.”
What Does the HDFC Bank Have To Say?
At the bank’s annual general meeting over the weekend Aditya Puri, the chief of HDFC Bank had vetoed any ‘conflict of interest’.
Puri said, “We had received some whistle-blowing complaints, internal enquiries carried out in the matter on the complaints received has not brought out any conflict of interest issue nor does it have any bearing on our loan portfolio.”
He added, “Enquiry did bring out another aspect related to personal misconduct exhibited by a set of individuals for which appropriate disciplinary actions have been taken.”
Regarding retirement of Ashok Khanna Puri clarified, “Ashok Khanna, being head of that business segment, had also participated in the enquiry process. Subsequently, he superannuated on 31 March, 2020 upon expiry of his tenure and as per the original terms of employment.”
Khanna denied all allegations against him when speaking to ET and claimed he retired as per the due process.
Khanna said, “The news published of my retirement on the completion of the contract is correct, I did not have any offer of an extension, as I already had received a 3 years extension.”
He also said, “There was no offer made to me which I declined. There is an attempt to malign my name and reputation by someone. I have worked for 18 yrs and created a great quality – highly profit making & envious franchise for the bank. I have always practiced zero tolerance for any malafide intent, be it channel partners or employees.“
Other Banks Also Sell Products, But With Borrowers Permission!
ICICI Bank and Axis Bank also offer similar products. Although, this sale is only done if the borrower consents it.
On this, ICICI Bank clarified that only 5% of its customers purchased such a product.
The ICICI bank said in an email statement, “We would like to clarify that ICICI Bank does not sell any accessory while providing vehicle loans to customers.” It also stated, “In case a customer wishes to buy an accessory, he/she has the option to seek finance from us for the product while availing the vehicle loan. We have seen that only 5% of our customers purchase a GPS tracker on finance from us on a monthly basis.”
However, does termination of employees solve the issue? Steps need to be taken to amend loan policies in any financial institution and make the consumers aware of the loan business.
You as an individual should question everything whenever you are getting into something especially finance-wise and research thoroughly before diving in!