Understanding the RBI’s Fine on HSBC: What it Means for Credit Card Users

The Reserve Bank of India (RBI) recently fined HSBC Bank Rs 29.6 lakh for not following credit card rules. This penalty was imposed on June 24, 2024. But what does this mean for you, the credit card user?

RBI has guidelines for how banks handle credit cards, including how they calculate the minimum amount you must pay each month (minimum payment due). According to RBI, HSBC failed to ensure that a specific calculation method, designed to prevent your credit card debt from growing faster than you can pay it off, was being followed in some accounts.

The minimum payment due is the least amount you need to pay on your credit card bill each month to avoid late fees and penalties. It’s typically a percentage of your total outstanding balance.

The RBI says HSBC’s method for calculating the minimum payment due in some cases resulted in “negative amortization.” This means the outstanding balance on the credit card actually increased, even though the cardholder made the minimum payment. This can trap cardholders in a cycle of debt, making it very difficult to ever pay off the credit card balance.

If you’re an HSBC credit cardholder, it’s a good idea to review your past statements and make sure your minimum payment due has been calculated correctly. If you suspect an error, contact HSBC customer service immediately or file a complaint with the RBI.

The RBI’s action is focused on ensuring banks follow the rules to prevent credit card debt from spiraling out of control. HSBC’s failure to follow this rule could have put some customers at risk of accumulating more debt than they could manage.

The fine is for rule violations identified during a routine inspection by RBI and doesn’t affect the validity of any transactions you’ve made with HSBC. RBI can take further action against HSBC if needed.