The world's local bank

Explanation of LOP representation on statements

Loan on Phone (LOP) is a facility by which you can make purchases on your credit card and then convert the purchase amount into installments.

The steps involved in a typical LOP transaction are as follows:

1.	You make the purchase at any merchant establishment.
2.	You call up the Customer Service Center and get the transaction converted into an LOP.
3.	EMI value for the LOP transaction and Processing Fee is then calculated.
4.	Statement with details of the LOP transaction is printed on the billing date.

Sample statement transaction box.

With reference to the sample statement transaction box above, we shall explain calculations and entries seen on the statement.

Calculations:

The EMI value is calculated as (Purchase Amount/1000) x Monthly Installment per Rs.1000. The Monthly Installment Table is given below -

Tenor Option	Monthly Installments Per Rs. 1000
	Platinum Credit Card	Gold Credit Card	Classic Credit Card

6 Month	Rs. 176	Rs. 177	Rs. 177
12 Month	Rs. 92	Rs. 93.1	Rs. 93.1
18 Month	Rs. 64	Rs. 65.2	Rs. 65.2
24 Month	Rs. 50	Rs. 51.4	Rs. 51.4

In the case here, the purchase amount is Rs. 29,190, the card is an HSBC Classic Credit Card and the application is for a 24-month LOP.

Hence the monthly installment value is calculated as -
(29,190/1000) x 51.4 = Rs. 1500.36 (see entry 4 in the sample statement below)

Furthermore, a one time processing fee of 2% of transaction value, subject to a minimum of Rs.100 is applied.

For the case in point, the processing fee = 2% of Rs.29,190 = Rs. 583.80 (refer to entry 3 below)

In line with Ministry of Finance guidelines, a Service Tax of 12.36% is levied on Processing Fee amount.

Service Tax Assessment = 12.36% of 583.80 = Rs. 72.15 (refer to entry 5 in the example)

Statement Entries:

We shall now look at how these transactions are reflected on your credit card statement.

There are 4 lines of credit for any credit card account viz. Purchase (Retail), Cash, Balance Transfer and Loan (LOP). The bottom part of the transaction box on your statement describes the outstanding amounts for each line so you may track your account better.

The way LOP transactions are handled is such that the entire loan amount (EMI x no. of months) is put in the Loan line. Each month one installment is taken from the Loan line and billed to the Retail line. Every month, EMIs keep going from Loan line to the Purchase line until all EMIs are billed at the end of the LOP duration.

We shall now explain each entry in the statement image above -

Entry No.	Explanation

1.	This is the purchase transaction carried out by the cardholder on 16 Dec 2008.
2.	On 23 Dec the purchase transaction is converted to an LOP from a normal retail transaction. This is represented by the credit transaction to the purchase line for the purchase amount (Rs. 29,190 in this case)
3.	Installment Processing Fee levied
4.	1^st installment for the EMI amount (Rs. 1500.36) is billed on the Purchase line.
5.	Service Tax at 12.36% levied on Processing Fee
6.	This is the entry corresponding to entry 4 above. This credits the Loan line for an amount equal to one month's EMI.
7.	This represents the amount in the Loan line which is not yet billed for this LOP transaction. The total loan amount = EMI x duration = 1500.36 x 24 = Rs. 36,008.64 But out of this the first installment has been billed in this statement. Hence the unbilled amount is EMIs for the remaining 23 installments = 1500.36 x 23 = Rs. 34,508.42
8.	At the bottom, the statement shows your outstanding amounts for each line - Purchase, Cash, LOP and Balance Transfers. The TOTAL LOAN OUTSTANDING field gives you the sum of EMIs which are not yet billed for all the LOP transactions on your account.
9.	NET OUTSTANDING BALANCE is the sum of your outstanding amounts on Purchase, Cash, BT and LOP lines. Kindly note that this does not denote the payment due this month. The payment due this month is given under Total Payment Due field at the top right corner of your statement.

Privacy and Security | Terms of Use | Hyperlink Policy
© Copyright 2010. The Hongkong and Shanghai Banking Corporation Limited, India (HSBC India). Incorporated in Hong Kong SAR with limited liability. All rights reserved.