The Reserve Bank of India has released a fresh set of rules related to debit and credit cards. These new guidelines will be applicable from July 1, 2022 overhauling the existing rules for banks and non-banking finance companies (NBFCs).
With this, the RBI has announced penalties on banks and NBFCs who don’t comply with the new guidelines. In case any bank issues or upgrades the debit or credit cards of customers without their consent, the RBI will issue a penalty.
As part of the rules, the RBI has permitted banks to take up credit card business only if they have a net worth of Rs 100 crore. The banks can undertake the business wither themselves or in partnership with other card-issuing banks or NBFCs.
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Notably, the RBI has permitted the Urban cooperative banks (UBCs) with minimum net worth of Rs 100 crore to set up credit card businesses post getting approval from the regulator. It is important to note that such UCBs must have a core banking platform.
As per RBI’s new rules, the UCBs aren’t allowed to issue co-branded credit cards.
The Regional Rural Banks (RRBs) that have a net worth of Rs 1000 crore are permitted to issue credit cards in collaboration with their sponsor bank or other banks.
According to a directive released by the RBI, “NBFCs shall not issue debit cards, credit cards, charge cards, or similar products virtually or physically” without taking prior approval.
Besides these rules, the RBI has mandated banks to provide options for disabling or blocking the form factor via mobile banking, internet banking, SMS, IVR or any other mode.
Here are the main guidelines related to credit cards
- No hidden charges on credit cards that were issued free of charge.
- Card issuers can now consider an insurance cover for liabilities arising out of lost credit cards, or credit card frauds. To process this insurance cover, the issuer will have to obtain explicit permission from the card holder.
- In case a credit card hasn’t been activated within 30 days from the date of issuance, the user will require a one-time password to activate it. This will help cover cases where an unauthorised person intercepts cards before their delivery to the real user.
- Credit information about card holders shouldn’t be reported to any credit bureaus like Cibil, CRIF, Experian, etc., before the card’s activation.
- Banks have to ensure complete transparency in the conversion of credit card transactions into equated monthly instalments (EMI). This should be done by clearly mentioning the amount of principal, interest, discount and charges, if any.
- EMI conversion with interest shall not be hidden as no-cost or zero-interest EMI.
- In case of rejection of a credit card application, the issuer shall convey in writing the reason for such rejection.
- Requests to close an existing credit card shall be honoured within seven working days. Failure to do so shall result in a penalty of ₹500 per day of delay, payable to the customer.
- Closure of credit cards if not used for a period of one year, with a 30-day notice to the card holder.
- Any changes in charges related to the credit card shall be intimated to the customer 30 days prior to their implementation.
Here are the main rules related to debit cards:
- Debit cards shall be issued to only to the customers who have a savings bank or current account.
- No debit cards shall be issued to cash credit or loan account holders.
- Banks shall not force a customer to avail a debit card. Moreover, they shall not link holding a debit card to avail any other facilities provided by the bank.
- Other form factors of debit cards, such as wearables, may be issued by scheduled commercial banks.
