RBI Levies ₹29.60 Lakh Penalty on HSBC for Card Regulation Breaches

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The Reserve Bank of India (RBI) has imposed a penalty of ₹29.60 lakh on The Hongkong and Shanghai Banking Corporation Limited (HSBC) for non-compliance with specific directions related to credit card, debit card, and Rupee-denominated co-branded pre-paid card operations. The RBI’s decision was announced on Friday, highlighting significant regulatory lapses by the bank.

RBI Imposes ₹29.60 Lakh Fine on HSBC Bank for Card Rule Violations
RBI Imposes ₹29.60 Lakh Fine on HSBC Bank for Card Rule Violations

The Reserve Bank of India (RBI) has imposed a penalty of ₹29.60 lakh on The Hongkong and Shanghai Banking Corporation Limited (HSBC) for non-compliance with specific directions related to credit card, debit card, and Rupee-denominated co-branded pre-paid card operations. The RBI’s decision was announced on Friday, highlighting significant regulatory lapses by the bank.

The central bank conducted a Statutory Inspection for Supervisory Evaluation (ISE 2022) of HSBC with reference to its financial position as of March 31, 2022. The inspection revealed several instances of non-compliance with RBI’s directions concerning card operations. Consequently, a notice was issued to HSBC, demanding an explanation for its failure to adhere to these directives.

HSBC was found to have violated RBI guidelines, particularly by failing to prevent negative amortisation while computing the Minimum Payment Due in certain credit card accounts. Negative amortisation occurs when the payments made by a borrower are not sufficient to cover the interest charged, resulting in an increasing loan balance.

After considering HSBC’s response to the notice, oral submissions during a personal hearing, and additional submissions made by the bank, the RBI concluded that the charges were substantiated. This warranted the imposition of a monetary penalty on the bank.

“The penalty has been imposed for non-compliance with certain directions issued by the Reserve Bank of India (RBI) on ‘Credit Card, Debit Card, and Rupee Denominated Co-branded Pre-paid Card operations of Banks,'” the RBI stated. However, the central bank clarified that the penalty is based on deficiencies in statutory and regulatory compliance and does not reflect the validity of any transactions or agreements between HSBC and its customers.

The RBI’s action underscores its commitment to ensuring strict adherence to regulatory guidelines by financial institutions, thereby protecting consumer interests and maintaining the integrity of the banking system.

Sources By Agencies

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