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The Reserve Bank of India (RBI) has released master directions for credit and debit card issuance in the year 2022. These fresh guidelines will come into effect from July 1, 2022. The guidelines apply to banks excluding payment banks, state co-operative banks, and district central co-operative banks. Also, all NBFCs operating in India should follow the new norms of card issuance.

Card issuers are banks that issue debit or credit cards and NBFCs which have been permitted by RBI to issue credit cards in India.

A credit card is a physical or virtual payment instrument containing a means of identification, issued with a pre-approved revolving credit limit, that can be used to purchase goods and services or draw cash advances, subject to prescribed terms and conditions.

For credit card business, scheduled commercial banks (SCBs) other than Regional Rural Banks (RRBs) with a net worth of 100 crore and above are now allowed to undertake credit card business either independently or in a tie-up arrangement with other card-issuing banks/NBFCs with the approval of their Boards. For setting up separate subsidiaries for undertaking credit card business, these banks will need prior approval from the Reserve Bank.

Meanwhile, RRBs are allowed to issue credit cards in collaboration with their sponsor bank or other banks.

To issue credit cards, the issuers are directed to provide a one-page Key Fact Statement along with the credit card application containing the important aspects of the card such as rate of interest, and quantum of charges, among others. In case of rejection of a credit card application, the card issuer shall convey in writing the specific reason/s which led to the rejection of the application.

Further, RBI directs that card issuers can consider introducing, at the option of the customers, an insurance cover to take care of the liabilities arising out of lost cards, card frauds, etc. For those offering card issuance in tie-up with insurance companies, the card issuers are required to obtain explicit consent in writing or digital mode from the cardholders along with the details of the nominee/s.

To ensure the protection of the card, the issuers are directed to seek One Time Password (OTP) based consent from the cardholder for activating a credit card if the same has not been activated by the customer for more than 30 days from the date of issuance. If no consent is received for activating the card, card issuers shall close the credit card account without any cost to the customer within seven working days from the date of seeking confirmation from the customer.

For a renewed or replaced card, the closure of an inactivated card shall be subject to payment of all dues by the cardholder.

No card issuer shall report any credit information relating to a new credit card account to Credit Information Companies before activation of the card. Any credit information relating to such inactivated credit cards already reported to these companies, then it shall be withdrawn immediately and it shall not take more than 30 days from the effective date of these directions.

Among the underwriting standards, card issuers are required to ensure complete transparency in the conversion of credit card transactions to Equated Monthly Instalments (EMIs) by clearly indicating the principal, interest, and upfront discount provided by the merchant/card-issuer (to make it no cost), before the conversion. The same shall also be separately indicated in the credit card bill/statement. EMI conversion with an interest component shall not be camouflaged as zero-interest/no-cost EMI.

These issuers need to ensure that loans offered through credit cards comply with the instructions on loans and advances issued by the Reserve Bank from time to time.

Further, the issuers are required to ensure the credit limit as sanctioned and advised to the cardholder is not breached at any point in time without seeking explicit consent from the cardholder.

Card issuers are allowed to issue credit cards/charge cards to individuals for personal use together with add-on cards wherever required. These cards can also be linked to overdraft accounts. Also, business credit cards are allowed to be issued to business entities/individuals for business expenses.

Moreover, RBI directs that add-on cards shall be issued with a clear understanding that the liability will be that of the principal cardholder. Similarly, while issuing corporate credit cards, the responsibilities and liabilities of the corporate and its employees shall be specified. The liability of the corporate/business entity shall form part of its assessed credits.

For closure of credit card, any request shall be honored within seven working days by the credit card issuer, subject to payment of all dues by the cardholder. After the closure of a credit card, the cardholder shall be immediately notified about the closure through email, SMS, etc.

Failure on the part of the card-issuers to complete the process of closure within seven working days shall result in a penalty of 500 per day of delay payable to the customer, till the closure of the account provided there is no outstanding in the account, RBI directed.

Also, RBI directs that if a credit card has not been used for more than one year, the process to close the card shall be initiated after intimating the cardholder. If no reply is received from the cardholder within 30 days, the card account shall be closed by the card issuer, subject to payment of all dues by the cardholder. The information regarding the closure of the card account shall also accordingly be updated with the Credit Information Company/ies within 30 days.

According to RBI, the interest charged on credit cards shall be justifiable having regard to the cost incurred and the extent of return that could be reasonably expected by the card issuer. The issuers shall also prescribe an interest rate ceiling in line with other unsecured loans, including processing and other charges, in respect of credit cards as part of their Board approved policy. In case card issuers charge interest rates that vary based on the payment/default history of the cardholder, there shall be transparency in levying such differential interest rates.

Furthermore, RBI states that card issuers shall quote Annualized Percentage Rates (APR) on credit cards for different situations such as retail purchases, balance transfer, cash advances, non-payment of the minimum amount due, late payment, etc., if different.

"The card-issuers shall specify in the billing statement, the level of the unpaid amount of the bill i.e., part payment beyond ‘minimum amount due, at which the interest-free credit period benefits would not be available to cardholders," RBI said in the guidelines.

Meanwhile, RBI asks card issuers to make changes in charges with prospective effect by giving prior notice of at least one month. If a cardholder desires to surrender his/her card on account of any change in charges to his/her disadvantage, he/she shall be permitted to do so without levying any extra charge for such closure, subject to payment of all dues by the cardholder.

"There shall not be any hidden charges while issuing credit cards free of charge," RBI said for credit cards.

In the matter of recovery of dues, card-issuers shall ensure that they, as also their agents, adhere to the extant instructions on Fair Practices Code for lenders, RBI stated.

RBI mentioned that card-issuers shall ensure to comply with the extant guidelines in respect of engagement of recovery agents issued by the Reserve Bank, as amended from time to time.

RBI strictly prohibited card-issuers/their agents to not resorting to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude upon the privacy of the credit cardholders’ family members, referees, and friends, making threatening and anonymous calls or making false and misleading representations.

Here are the guidelines for debit cards as per RBI's circular:

1. Banks are directed to formulate a comprehensive debit cards issuance policy with the approval of their Boards and issue debit cards to their customers in accordance with this policy. Prior approval of the Reserve Bank is not necessary for banks desirous of issuing debit cards to their customers.

2. Debit cards shall only be issued to customers having Savings Bank/Current Accounts.

3. No bank shall issue debit cards to cash credit/loan account holders. However, it will not preclude the banks from linking the overdraft facility provided along with Pradhan Mantri Jan Dhan Yojana accounts with a debit card.

4. Banks shall not force a customer to avail debit card facility and shall not link issuance of a debit card to availment of any other facility from the bank.

5. SCBs may issue other form factors in place of a plastic debit card such as wearables after obtaining explicit consent from the customer.

6. Form factors issued in place of a debit card shall be subject to the specific and general guidelines applicable to debit cards.

7. Banks shall provide options for disabling or blocking the form factor through mobile banking, internet banking, SMS, IVR, or any other mode.

8. Banks shall submit a detailed report to the Department of Regulation, Reserve Bank of India, prior to the issuance of any such form factors. Any bank that has already issued such product prior to the effective date of the Master Direction, shall submit a detailed report to the Department of Regulation within 30 days from the effective date.

9. The banks shall undertake a review of their operations/issue of debit cards on a half-yearly basis. The review shall include, inter-alia, card usage analysis including cards not used for long durations and the inherent risks therein.

A debit card is a physical or virtual payment instrument containing a means of identification, linked to a Saving Bank/Current Account which can be used to withdraw cash, make online payments, do PoS terminal/Quick Response (QR) code transactions, fund transfer, etc. subject to prescribed terms and conditions.

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