Amid tightening regulatory oversight in the banking sector, the Reserve Bank of India (RBI) has imposed a monetary penalty of ₹31.8 lakh on Hongkong and Shanghai Banking Corporation (HSBC). The action comes in response to non-compliance with regulatory directions related to inoperative accounts and unclaimed deposits.
According to the central bank, the decision follows a statutory inspection conducted with reference to the bank’s financial position as of March 31, 2025. During the supervisory review, deficiencies were identified indicating that the bank had failed to fully comply with RBI’s prescribed guidelines, prompting the issuance of a show-cause notice.
RBI stated that the bank was given adequate opportunity to respond, including submission of written explanations and participation in a personal hearing. After evaluating the responses and supporting material, the regulator concluded that the charges were substantiated, warranting the imposition of the penalty.
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Key deficiencies identified
The inspection revealed that HSBC had not hosted a searchable database of unclaimed deposits on its website. Such a facility is considered critical for customers, as it enables them to trace forgotten or long-dormant accounts and claim pending funds.
Further, the bank was found to have failed in certain cases to generate and assign the mandatory ‘Unclaimed Deposits Reference Number (UDRN)’ while transferring unclaimed deposits to the Depositor Education and Awareness (DEA) Fund. Under RBI norms, this requirement ensures traceability and transparency of funds transferred to the fund.
What it means for customers
RBI clarified that the penalty is based solely on deficiencies in regulatory compliance and does not question the validity of any transactions or agreements entered into by the bank with its customers.
This effectively means that customer deposits and transactions remain secure. However, the findings highlight gaps in the bank’s internal processes and compliance mechanisms, underscoring the need for systemic improvements. RBI’s broader objective in such actions is to strengthen transparency and accountability across the banking system.
Scope for further action
The central bank also indicated that the monetary penalty does not preclude the possibility of additional regulatory action. In case of further or more serious lapses, stricter measures could be initiated against the bank.
Experts note that RBI has, in recent years, significantly tightened compliance standards for banks. Particular emphasis has been placed on unclaimed deposits and dormant accounts, given their direct linkage to customer protection and financial integrity.
Signal for the banking sector
The action is being viewed as a clear signal to the broader banking industry that regulatory non-compliance, even in operational aspects, can invite penalties. RBI continues to reinforce that adherence to prescribed norms is essential to safeguard customer interests.
Unclaimed deposits, in particular, have remained an area of concern, with substantial sums lying idle for years without being claimed. In this context, banks are expected to proactively assist customers in accessing their funds and ensure that systems are transparent, accessible, and efficient.
The episode once again underlines that even minor lapses in compliance can lead to regulatory consequences, and indicates a continuing trend of stricter enforcement in the banking ecosystem.
About the author – Ayesha Aayat is a law student and contributor covering cybercrime, online frauds, and digital safety concerns. Her writing aims to raise awareness about evolving cyber threats and legal responses.
