Home/ Industry / Banking/  Key takeaways from RBI circular on credit cards

The Reserve Bank of India (RBI) has released directions on issuing credit and debit cards, aiming to empower card users and check misconduct of issuers. Mint examines the key points and their implications:

What are the new card rules?

RBI has consolidated old circulars into a master circular, mainly to protect customer interest and rein in the misconduct of card issuers. Non-bank lenders must seek RBI nod before issuing credit cards, and follow strict regulations on sharing data even with their co-branding partners. The circular lays down the governance framework for issuing cards, underwriting standards, closure, interest rates, and other charges. It has also outlined rules around customer conduct, under which issuers must ensure that agents refrain from bad recovery practices. Additionally, the master directions stipulate time-bound closure of inactive cards.

What should customers know?

The regulations empower credit card customers, mandate lenders to take consent of customers on various issues pertaining to credit cards, and also strengthen the grievance redressal mechanism. Card issuers need to provide customers with a page listing key facts such as interest rate and other charges at the time of application. In case an application is rejected, the issuer is bound to specify the reason for the rejection in writing. Customers can report instances of receiving unsolicited credit cards to RBI and claim compensation. As per the new rules, issuers may offer insurance cover, at the discretion of the customer.

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Photo: iStock

How would non-bank lenders benefit?

Non-bank lenders are allowed to issue credit cards without a banking partner after regulatory approval. Analysts believe that large non-banking financial companies, which already have a large customer base, may apply for a credit card licence. Bajaj Finance, which currently has a tie-up with DBS Bank and RBL Bank, said it is studying the guidelines.

What happens to co-branded cards?

Card issuers must ensure that cash-backs, discounts, and other offers advertised by a co-branding partner are delivered to the cardholder on time. Issuers will be liable for any delay or non-delivery. The role of the co-branding partner under the tie-up arrangement can only be limited to marketing/distribution of the cards and providing access to the cardholder for the goods/services that are offered. They cannot access information relating to transactions undertaken through the co-branded card. The aim is to prevent misuse of user data.

Will penal charges go down?

Some cut in penal charges is likely. Card issuers can report a credit card account as ‘past due’ (overdue) to credit information firms or levy penal charges only when a credit card account remains ‘past due’ for more than three days. RBI has indicated that penal interest charge levied should be computed on balance outstanding and from the payment due date rather than the current practice of charging penal interest on the full amount and from the bill date. CLSA estimates that late payment charges constitute 30-35% of fees on credit cards.


Gopika Gopakumar
Gopika Gopakumar has worked for over 15 years as a banking journalist across print and television media. Her expertise lies in breaking big corporate stories and producing news based TV shows. She was part of the 2013 IMF Journalism Fellowship Program where she covered the Annual & Spring meetings of the International Monetary Fund in Washington D.C. She started her career with CNBC-TV18, where she also produced a news feature show called Indianomics and an award winning show on business stories from South India called Up South. She joined Mint in 2016.
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Updated: 28 Apr 2022, 01:11 AM IST
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