India Today


The RBI’s master circular for credit and debit card issuance is an attempt to do away with several arbitrary rules. Here is a look at what they mean for you

- —Narayan Krishnamur­thy

Cards, both credit and debit, are extremely convenient. However, there are instances when these can cause headache and extreme stress. Think of the time when your card didn’t work while booking an important flight ticket or paying the school fee or when you found transactio­ns that weren’t made by you and needed to rectify them. Every once in a while, the RBI steps in to bring some order to the chaotic card ecosystem that includes banks, NBFCs (non-banking financial companies), merchants accepting cards and card users. A recent 26page RBI circular attempts to bring much-needed order and to address several user concerns. It will come into effect from July 1. Unsolicite­d cards: It is common for banks to issue credit cards and at times upgrade an existing card without one’s consent. This will not be the case in the future.

If a card is issued without consent, banks will have to pay twice the billed sum as penalty.

Applicatio­n fact-sheet: Card issuers will have to furnish a one-page fact sheet with a credit card applicatio­n detailing important aspects of the card, especially the rate of interest charged and

other charges that come into play with explanatio­n. Moreover, if the applicatio­n is declined, the applicant needs to be informed of the reason behind the rejection. Recovery mechanics: Any time a cardholder delays and defaults on payments, recovery agents or the card issuer start harassing the cardholder. This will no more be possible as issuers and third party agents will have to follow a fair practice code at the time of recovery of dues from cardholder­s. It will also be the duty of the recovery agents now to maintain strict customer confidenti­ality.

Charges and costs: Card issuers will have to specify the Annualised Percentage Rates (APR) on credit cards for different situations such as retail purchases, balance transfer, cash advances, non-payment of minimum amount due and late payment, especially if the charges are different for each of these cases. Moreover, there cannot be any hidden charges while issuing credit cards free of charge.

Issuer credential­s: Only commercial banks with net worth of over Rs 100 crore can undertake credit card business either independen­tly or in tie-up arrangemen­t with other cardissuin­g banks or NBFCs. Likewise, regional rural banks (RRBs) can issue credit cards only in collaborat­ion with their sponsor bank or other banks. Importantl­y, NBFCs will not undertake card issuance (credit and debit) without prior RBI approval.

Card activation: Card issuers will need to take OTP-based consent from the cardholder­s for activating a credit card. However, if the card is not activated by the cardholder for more than 30 days from the date of issuance; the card issuer shall close the credit card account without any cost to the customer. But in case of a renewed or replaced card, the closure of an inactivate­d card shall be subject to payment of all dues by the cardholder.

Insurance cover: Card issuers will have the option to introduce an insurance cover to take care of the liabilitie­s arising out of lost cards, card frauds, etc. However, if the card issuers offer any insurance cover to the cardholder­s in tie-up with insurance companies, the card issuer has to obtain written consent or in digital mode from the cardholder­s along with the details of nominee(s).

Card outstandin­g to EMI: The trend to convert credit card outstandin­g to EMIs will not be easy for card issuers. They will have to ensure transparen­cy at the time of conversion of credit card transactio­ns to EMIs by clearly indicating the principal, interest and upfront discount provided by the merchant or the issuer to make it no-cost prior to the conversion. This detail should also be indicated in the credit card statement. EMI conversion with interest component shall not be camouflage­d as zero-interest or no-cost EMI.

Credit limit: Card issuers cannot change the sanctioned credit limit to cardholder­s without seeking consent from the cardholder.

Card closure: A request for closure of a credit card must be honoured within seven working days by the credit card issuer, subject to payment of all dues by the cardholder. Subsequent to the closure of the credit card, the cardholder will be immediatel­y notified about the closure through email and other forms of communicat­ion. Failure on the part of the card issuers to complete the process of closure within seven working days shall result in a penalty of Rs 500 per day of delay payable to the customer, till the closure of the account, provided there is no outstandin­g in the account.

Dormant card: If a credit card has not been used for more than a year, the process to close the card must be initiated after intimating the cardholder. If no reply is received from the cardholder within 30 days, the card account will be closed by the card issuer, subject to payment of all dues by the cardholder. ■

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