RBI Slaps Penalties on American Express and HDB Financial Services

The Reserve Bank of India (RBI) has imposed monetary penalties on American Express Banking Corp and HDB Financial Services Ltd for violating regulatory guidelines. The action was taken after statutory inspections and supervisory evaluations revealed instances of non-compliance.

Key Highlights:

• American Express Banking Corp:
  • Penalty: ₹31.80 lakh
  • Violation: Non-compliance with the RBI’s Credit Card and Debit Card – Issuance and Conduct Directions.
  • Issue: Failed to promptly reverse credit balances to customers’ accounts arising from refunds or failed/reversed transactions.
• HDB Financial Services Ltd:
  • Penalty: ₹4.2 lakh
  • Violation: Breach of RBI’s Know Your Customer (KYC) Directions, 2016.
  • Issue: Failed to obtain mandatory PAN or Form 60 for certain loan accounts.
• RBI clarified that these penalties relate to regulatory non-compliance and do not impact the validity of customer transactions or agreements.

RBI Norms Involved

1. Credit Card and Debit Card – Issuance and Conduct Directions, 2022
   • Mandates timely refund/reversal of failed transactions and transparent customer communication.
2. Know Your Customer (KYC) Directions, 2016
   • Requires verified identification, including PAN or equivalent documentation, before granting loans or opening accounts.
3. Penalty Framework under Banking Regulation Act, 1949
   • RBI can impose monetary penalties after inspection and due process (including show-cause notice and response evaluation).