New Delhi: The RBI on Friday said it has imposed a penalty of Rs 29.6 lakh on Hongkong and Shanghai Banking Corporation Ltd (HSBC) for non-compliance of certain card-related directions.

Why was a heavy fine imposed?

The fine has been imposed on HSBC for non-compliance with certain directions issued by the Reserve Bank of India (RBI) on banks' operations in credit cards, debit cards and rupee-denominated co-branded prepaid cards, the central bank said in a statement.

RBI had issued notice

Based on the supervisory findings of non-compliance with RBI directions and related correspondence in that regard, a notice was issued to the bank, advising it to show cause as to why a penalty should not be imposed on it for failure to comply with the said directions.

decision taken like this 

After considering the bank's reply to the notice, oral submissions made during the personal hearing and examination of additional submissions made by it, RBI found that the allegations against the bank were substantiated, which justified imposition of monetary penalty.

RBI said the bank failed to ensure that there was no negative amortization while calculating the minimum payment due in certain credit card accounts. However, RBI said the penalty is based on deficiencies in statutory and regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers. Further, the imposition of monetary penalty does not prejudice any other action that may be initiated against the bank by RBI.