RBI: ₹500/Day Penalty

A recent case has highlighted the importance of banks closing credit card accounts in a timely manner, as mandated by the Reserve Bank of India (RBI). The RBI has guidelines that require banks to act swiftly on credit card account closure requests, with strict deadlines to avoid penalties.

The RBI's Master Direction – Credit Card and Debit Card – Issuance and Conduct Directions, 2022, lays down operational guardrails to prevent banks from stalling account closures. In a recent instance, a bank was directed to compensate a cardholder ₹3.21 lakh for delay in account closure. The customer had cleared all outstanding dues and formally submitted a cancellation request before being compensated.

The compensation for delay in account closure is calculated at ₹500 per day of delay, as per the RBI's mandated formula. This means that consumers who experience delays in account closure can claim substantial penalties from their banks. The RBI's guidelines are designed to protect consumers from unnecessary delays and associated problems, such as surprise annual fees and sudden drops in credit score.

## Why it matters The severity of the RBI's mandate is a significant development for consumers, who can now turn a prolonged grievance into an enforceable claim against their lender. By knowing the rules and following a disciplined paper trail, consumers can ensure they remain legally protected when closing a credit card account. The RBI's guidelines are a crucial safeguard against banks that fail to act on account closure requests in a timely manner.

In light of this, it is essential for consumers to be aware of their rights and the penalties that banks face for delaying account closures. By understanding the RBI's guidelines and the compensation formula, consumers can take action to protect their interests and avoid unnecessary delays and associated problems.