The recent decision of two banks to block credit cards which are not functional for long has shocked credit card users across the country. The banks have also decided not to let those with pending bills use their credit cards. General secretary of the Credit Card Holders Association of India (CGHAI) CV Giddappa spoke to DNA and said that the decisions have been taken to encourage people to save.
Were credit card companies facing any losses due to which they were forced to take such steps?
Banks levy Rs300 on credit card holders as maintenance charge and get 2.5% commission on every transaction. But when credit cards are not used at all, the banks lose out on their commission. And as people are not using their credit card, the maintenance charge that is being incurred is in actuality, much more than what is being levied.
Thus, these companies are facing losses and to stop this, they are blocking services. The banks won’t get any income by maintaining the accounts of the customers who don’t use the services. There are 40 credit card companies in Bangalore which are facing losses and it has been two months now since any new credit card has been issued by the banks. Only two Indian banks are issuing credit cards based on customers meeting the criteria. This is left to the banks’ discretion.
Are there any guidelines for these banks to follow?
They are working as per the guidelines issued by the Banking Codes and Standard Board. No norm of RBI or the board is being violated. Blocking accounts and transactions is left to the the bank’s discretion. The accounts will be blocked after issuing notices to people.
If one bank blocks a credit card, can the card holder obtain a card elsewhere?
Once a card is blocked at one bank, no other bank can issue a credit card again as the account holder’s name is listed in the Credit Information Bureau of India Limited (Cibil) list. This list was issued in 2005 and sets a scale of 0-75 (0 being the lowest and 75 being the highest credit limit). The credit limit of most Bangaloreans is above the 30 mark, indicating their credit limit is increasing. We do not want this limit to increase further.
Is there any solution to the problem?
Presently, there is no solution to this problem as it was not anticipated. A special committee comprising experts from various banks and economists will be constituted to review the problem and chalk out a solution within six months. The aim of blocking credit cards is to encourage savings and other alternatives of investment. A campaign for voluntary surrendering of cards has also been commissioned.
