RBI issues circular on credit & debit cards; fine of Rs 500 per day if there is a delay in closure

RBI issues circular on credit & debit cards; fine of Rs 500 per day if there is a delay in closure

RBI issues circular on credit & debit cards; fine of Rs 500 per day if there is a delay in closure

The provisions of these Directions relating to credit cards shall apply to every Scheduled Bank (excluding Payments Banks, State Co-operative Banks and District Central Co-operative Banks) and all Non-Banking Financial Companies (NBFCs) operating in India.

The Reserve Bank of India has come up with new rules and regulations on credit card and debit card issuance and operations. The Directions called the Reserve Bank of India (Credit Card and Debit Card – Issuance and Conduct) Directions, 2022. These Directions shall be effective from July 01, 2022.

The provisions of these Directions relating to credit cards shall apply to every Scheduled Bank (excluding Payments Banks, State Co-operative Banks and District Central Co-operative Banks) and all Non-Banking Financial Companies (NBFCs) operating in India.

Closure of Credit Card

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

Cardholders shall be provided with the option to submit request for closure of credit card account through multiple channels such as helpline, dedicated e-mail-id, Interactive Voice Response (IVR), prominently visible link on the website, internet banking, mobile-app or any other mode. 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.

If a credit card has not been used for a period of 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 a period of 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 card account shall also accordingly be updated with the Credit Information Company/ies within a period of 30 days.

Subsequent to the closure of the credit card account, any credit balance available in credit card accounts shall be transferred to the cardholder’s bank account. Card issuers shall obtain the cardholder’s bank account details if the same is not available to them.

Issue of Credit Cards

The issue of unsolicited cards/upgradation is strictly prohibited. In case, an unsolicited card is issued/existing card upgraded and activated without the explicit consent of the recipient and the latter is billed for the same, the card-issuer shall not only reverse the charges forthwith, but also pay a penalty without demur to the recipient amounting to twice the value of the charges reversed.

Card-issuers shall seek One Time Password (OTP) based consent from the cardholder for activating a credit card, if the customer has not activated the same for more than 30 days from the date of issuance. Suppose no consent is received for activating the card. In that case, card issuers shall close the credit card account without any cost to the customer within seven working days from date of seeking confirmation from the customer. 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.

The consent for the cards issued or the other products/services offered along with the card shall be explicit and shall not be implied. In other words, the applicant’s written consent shall be required before issuing a credit card.

Interest rates and other charges

* The card-issuers shall publicise the interest rates charged to various categories of customers through their website and other means. Card issuers shall indicate upfront to the credit cardholder the methodology of calculation of finance charges with illustrative examples, particularly in situations where the customer pays only a part of the amount outstanding.

* 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 amortisation.

* There shall no hidden charges while issuing credit cards free of charge. The regulator has asked banks to ensure that the overdue interest is not adjusted to the loan’s principal, causing negative amortisation.

*Card issuers shall 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, 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.

Scheduled Commercial Banks (SCBs) other than Regional Rural Banks (RRBs) with net worth of ₹100 crore and above are permitted to undertake credit card business either independently or in tie-up arrangement with other card issuing banks/NBFCs with the approval of their Boards. SCBs (excluding Small Finance Banks and Regional Rural Banks) desirous of setting up separate subsidiaries for undertaking credit card business shall require prior approval of the Reserve Bank.

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