Credit cards: RBI issues mastering directions for issuance of credit cards: What cardholders should know

The Reserve Bank of India (RBI) has issued master directions for the issuance of credit and debit cards. The directions were issued on April 21, 2022. The provisions relating to credit cards under the RBI (Credit Card and Debit Card – Issuance and Conduct) Directions, 2022 shall apply to every Scheduled Bank (excluding Payments Banks, State Co-operative Banks and District Central Cooperative Banks) and all Non-Banking Financial Companies (NBFCs) operating in India.

“These directions cover the general and conduct regulations relating to credit, debit and co-branded cards which shall be read along with prudential, payment and technology & cyber security related directions applicable to credit, debit and co-branded cards, as issued by the Reserve Bank,” stated RBI.

These directions will be effective from July 1, 2022.

Here is a look at some important points that credit card holders should know.

Types of credit cards
(a) Card-issuers may issue credit cards/charge cards to individuals for personal use together with add-on cards wherever required.
(b) Card-issuers may also issue cards linked to overdraft accounts that are in the nature of personal loans without any end-use restrictions subject to the conditions as stipulated in the overdraft account.
(c) Card-issuers may issue business credit cards to business entities/individuals for business expenses. The business credit cards may also be issued as charge cards, corporate credit cards or by linking a credit facility such as overdraft/cash credit provided for business purpose as per the terms and conditions stipulated for the facility concerned. Corporate credit cards can be issued together with add-on cards wherever required.
(d) The liability of the corporate/business entity on account of business cards shall form part of their total assessed credits for compliance to instructions issued by the Reserve Bank on Exposure Norms as well as Prudential norms on Income Recognition, Asset Classification and Provisioning to Advances.
(e) The add-on cards shall be issued only to the persons specifically identified by the principal cardholder under both personal and business credit card categories. Add-on cards shall be issued with the clear understanding that the liability will be that of the principal Master Directions – Credit Card and Debit Card – Issuance and Conduct Directions, 2022 9 cardholder. Similarly, while issuing corporate credit cards, the responsibilities and liabilities of the corporate and its employees shall be clearly specified. The liability of the corporate/business entity shall form part of its assessed credits.

Closure of Credit Card
(a) Any request for closure of a credit card shall be honored within seven working days by the credit card-issuer, subject to payment of all dues by the cardholder. Subsequent to the closure of credit card, the cardholder shall be immediately notified about the closure through email, SMS, etc. Cardholders shall be provided the option to submit a request for closure of credit card account through multiple channels such as helpline, dedicated email-id, Interactive Voice Response (IVR), prominently visible link on the website, internet banking, mobile-app or any other mode . The card-issuer shall not insist on sending a closure request through post or any other means which may result in the delay of the receipt of the request. 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 .
(b) 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.
(c) Subsequent to closure of 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 details of the cardholder’s bank account, if the same is not available with them.

Interest rates and other charges
(a) Card-issuers are directed to be guided by the instructions on interest rate on advances issued by the Reserve Bank as amended from time to time, while determining the interest rate on credit card dues. 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. Card-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 which vary Master Directions – Credit Card and Debit Card – Issuance and Conduct Directions, 2022 10 based on the payment/default history of the cardholder, there shall be transparency in levying such differential interest rates. The interest rates as prescribed in the board approved policy and the rationale for the same shall be auditable. The card-issuers shall publicise through their website and other means, the interest rates charged to various categories of customers. Card-issuers shall indicate upfront to the credit cardholder, the methodology of calculation of finance charges with illustrative examples, particularly in situations where only a part of the amount outstanding is paid by the customer.

(b) Further, the card-issuers shall adhere to the following directions relating to interest rates and other charges on credit cards:
i. Card-issuers shall quote Annualized Percentage Rates (APR) on credit cards for different situations such as retail purchases, balance transfer, cash advances, nonpayment of minimum amount due, late payment etc., if different. The method of calculation of APR shall be given with clear examples for better comprehension. The APR charged, and the annual fee shall be shown with equal prominence. The late payment charges, including the method of calculation of such charges and the number of days, shall be prominently indicated. The manner in which the outstanding unpaid amount has been arrived at for calculation of interest shall also be specifically shown with prominence in all the billing statements. These aspects shall also be shown in the Welcome Kit in addition to being shown in the billing statements.
ii. 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 of interest.
iii. Card-issuers shall inform the cardholders of the implications of paying only ‘the minimum amount due’. A legend/warning to the effect that “Making only the minimum payment every month would result in the repayment stretching over months/years with consequential compounded interest payment on your outstanding balance” shall be prominently displayed in all the billing statements to caution the cardholders about The pitfalls in paying only the minimum amount due. The MITC shall specifically explain that the ‘interest-free credit period’ is suspended if any balance of the previous month’s bill is outstanding. The card-issuers shall specify in the billing statement, the level of unpaid amount of the bill ie, part payment beyond ‘minimum amount due’, at which the interest-free credit period benefits would not be available to cardholders.
iv. For this purpose, card-issuers will work out illustrative examples and include the same in the Welcome Kit sent to the cardholders and also place it on their website.
v. Card-issuers shall report a credit card account as ‘past due’ to credit information companies (CICs) or levy penal charges, viz. Late payment charges and other related charges, if any, only when a credit card account remains ‘past due’ for more than three days. The number of ‘days past due’ and late payment charges shall, however, be computed from the payment due date mentioned in the credit card statement, as specified under the regulatory instructions on ‘Prudential norms on Income Recognition, Asset Classification and Provisioning relating to Advances’ amended from time to time. Penal interest, late payment charges and other related charges shall be levied only on the outstanding amount after the due date and not on the total amount.
vi. Changes in charges shall be made only with prospective effect 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 . vii. There shall not be any hidden charges while issuing credit cards free of charge.

Billing
(a) Card-issuers shall ensure that there is no delay in sending/dispatching/emailing bills/statements and the customer has sufficient number of days (at least one fortnight) for making payment before the interest starts getting charged. In order to obviate frequent complaints of delayed billing, the card-issuer may consider providing bills and statements of accounts through internet/mobile banking with the explicit consent of the cardholder. Card-issuers shall put in place a mechanism to ensure that the cardholder is in the receipt of the billing statement.
(b) Card-issuers shall ensure that wrong bills are not raised and issued to cardholders. In case, a cardholder protests any bill, the card-issuer shall provide explanation and, where applicable, documentary evidence shall be provided to the cardholder within a maximum period of 30 days from the date of complaint.
(c) No charges shall be levied on transactions disputed as ‘fraud’ by the cardholder until the dispute is resolved.
(d) Card-issuers do not follow a standard billing cycle for all credit cards issued. In order to provide flexibility in this regard, cardholders shall be provided a one-time option to adjust the billing cycle of the credit card as per their convenience.
(e) Any credit amount arising out of refund/failed/reversed transactions or similar transactions before the due date of payment for which payment has not been made by the cardholder, shall be immediately adjusted against the ‘payment due’ and notified to the cardholder .
(f) Card-issuers shall seek explicit consent of the cardholder to adjust credit amount beyond a cut-off, one percent of the credit limit or ?5000, whichever is lower, arising out of refund/failed/reversed transactions or similar transactions against the credit limit for which payment has already been made by the cardholder. The consent shall be obtained through e-mail or SMS within seven days of the credit transaction. The card-issuers shall reverse the credit transaction to the cardholder’s bank account, if no consent/response is received from the cardholder. Notwithstanding the cut-off, if a cardholder makes a request to the card-issuer for reversal of the credit amount outstanding in the card account into his/her bank account, the card-issuer shall do it within three working days from the receipt of such request.

Issue of unsolicited facilities
(a) Unsolicited loans or other credit facilities shall not be offered to the credit cardholders without seeking explicit consent. In case an unsolicited credit facility is extended without the written/explicit consent of the cardholder and the latter objects to the same, the cardissuer shall not only withdraw the facility, but also be liable to pay such penalty as may be considered appropriate by the RBI Ombudsman, if approached.
(b) Card-issuers shall not unilaterally upgrade credit cards and enhance credit limits. Explicit consent of the cardholder shall invariably be taken whenever there is/are any change/s in terms and conditions. In case of reduction


in the credit limit, the card-issuer shall intimate the same to the cardholder.

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