What are the RBI guidelines for credit cards?

The use of credit cards is increasing rapidly in India. A credit card has become one of the major necessities of an individual. Therefore, to protect its customers, the Reserve Bank of India has introduced RBI guidelines for credit cards. Moreover, the official authority keeps updating the guidelines as required. In this article, let us have a look at the latest RBI guidelines for credit cards.

RBI Guidelines for Credit Cards

Who can issue cards

As per RBI, most Scheduled Commercial Banks (SCBs) with a net worth of Rs. 100 crores can issue credit cards. However, the exception is Regional Rural Banks (RRBs) as it needs to collaborate with other banks to do so. Moreover, Urban Cooperative Banks (UCBs) with a net worth of more than Rs. 100 crores can issue cards subject to certain guidelines. NBFCs registered with the RBI with a minimum net owned fund of Rs. 100 crores can issue credit cards, but they should have a Certificate of Registration and permission to enter the business.

Issue of Co-branded cards

Banks do not require RBI’s approval to issue co-branded credit cards. UCBs cannot issue credit cards in tie-ups with other non-bank entities.

Explicit written consent for cards

RBI rules state that explicit written consent will be required for all cards issued by a card issuer. Moreover, alternative digital modes with multifactor authentication are also eligible to be used in place of writing. However, that needs to be communicated to the RBI’s Department of Regulations.

Issue of unsolicited facilities

Credit card issuers cannot unilaterally upgrade credit cards and increase credit limits. They will require explicit consent from the customer for all changes in terms and conditions.

Reporting to credit information companies

In this guideline, card issuers cannot report any credit information about a new credit card account to Credit Information Companies (CICs) before the card is activated. In case any such information is provided to CIC, the card issuer will be required to inform the customer.

Other important rules for issuing credit cards

In this guideline, the credit card issuer needs to provide a one-page key fact statement. The issuer also needs to provide all the Most Important Terms and Conditions (MITC). The details are fees, charges, withdrawals, credit limits, etc.

Provisions regarding telemarketers

Credit card issuers need to ensure that the telemarketers who aim to promote the card comply with TRAI regulations as well as guidelines on Unsolicited Commercial Communications – National Customer Preference Register (NCPR). Moreover, telemarketers are only allowed to contact customers between 10:00 AM to 07:00 PM.

EMI conversion rules

In the case of EMIs, the issuer needs to provide clear details about principal, interest, and discount provided to make it at no cost and also, need to include such details in the card statement. Furthermore, all loans offered via credit card should comply with RBI instructions.

Credit cards to be closed within seven days

If a customer requests for credit card closure, the request needs to be fulfilled within seven days. The delay will result in a penalty of Rs. 500 per day till the account will be closed. Also, issuers need to provide their customers with multiple channels to submit a request to close a credit card like a helpline, dedicated e-mail-id, Interactive Voice Response (IVR), prominently visible links on the website, internet banking, and mobile app.

If the customer doesn’t use the credit card for more than a year, the issuer can close it after informing the cardholder and not receiving a response within 30 days.

Interest rates to be justifiable

RBI guidelines state that the interest rate needs to be justifiable, “having regard to the cost incurred and the extent of return that the card-issuer could reasonably expect.”

Minimum amount payment and past dues

RBI guidelines state that the issuers must inform the customers about the consequences of paying the only minimum amount due. Issuers can report a credit card account to CICs or levy charges only if a card account remains past due for over three days. Moreover, issuers need to mention all the charges before as no hidden cost will be applicable while issuing the credit card.

Credit Card Billing

This guideline states that there should be no delay in dispatching bills and customers should be provided with one fortnight to make payments. Moreover, cardholders now have a ‘one-time option to modify the billing cycle of the credit card as per their convenience.’ RBI has rolled out this guideline by recognizing the fact that issuing companies do not have a standard billing cycle for all credit cards issued by them.

Conduct to Customer

In this guideline, RBI states that any type of intimidation or harassment of any customer during debt collection would not be permissible.

Redressal of grievances

Credit card issuers are expected to have a grievance redressal mechanism in place. Also, they need to publicise it through electronic and print media, credit card bills, and account statements. Moreover, in case, complainants do not receive a satisfactory response from the issuer within one month, they have the right to approach the Office of the RBI Ombudsman.

Also Read: How to Get Credit Card for Students?

These were the major RBI guidelines for credit cards, however, they introduced some changes later.

Card issuers to seek OTP

This rule states that credit card issuers must first obtain OTP-based consent in case, a cardholder hasn’t activated his/her card for over 30 days from the date of issuance.

Credit limit approval

This guideline is a further addition to the one mentioned above. This states that credit card issuers need to make sure that the credit card limit that has been informed to the customer is never exceeded. Effective from October 1, 2022, issuers will require a cardholder’s written consent to increase credit limit instead of just a message regarding credit limit increase.

Interest Charges

RBI’s master circular states, ‘The terms and conditions for payment of credit card dues, including the minimum amount due, shall be stipulated so as to ensure there is no negative amortization. An illustration is included in the Annex. The unpaid charges/levies/taxes shall not be capitalized for charging/compounding interest.’

RBI Relaxes rules on Minimum Balance

According to RBI’s guidelines, ‘the minimum payment due (MPD) for your credit card will be calculated as higher of (100 per cent of all interest, fees and taxes; 5 per cent of total payment due of the statement), plus higher of (past due amount; over limit amount, if any) plus equated monthly instalment (EMI) amounts due (if any). This will be effective from December 1, 2022,’ the intimation which the reader received (name of bank withheld), read.’

RBI’s Latest Credit Card Rules to Enhance User Safety and Convenience

Only domestic card transactions are applicable

RBI ordered issuers to allow only domestic card transactions at ATMs and PoS terminals in India at the time of issuance or re-issuance of cards. It became effective on March 16, 2020.

Setting up additional services separately

If the cardholder wants any additional service on their credit cards, they will have to separately activate them on your banking app, internet banking or by calling or visiting a bank branch.

Set a transactional limit

According to RBI, cardholders can modify transaction limits within the overall card limit. This is applicable to domestic and international transactions at PoS, ATMs, and online transactions.

Disclaimer: The official authority, RBI keeps changing its guidelines for credit cards. Please refer to the official website to get the latest update and make an informed financial decision as this article does not intend to pass on any financial advice.

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