The Reserve Bank of India (RBI) has changed the rules governing debit and credit cards, imposing penalties on banks that issue or upgrade cards to users without their permission. It has also made it possible for Non-banking Financing Companies (NBFCs) to issue credit cards with the regulator’s previous approval. The new guidelines will take effect on July 1, 2022, and will apply to all scheduled banks and Non-bank Financial Companies. Let’s have a look at the upcoming changes in cards rules.
What are the new rules?
- Credit card activity is permitted for banks with a net worth of Rs 100 crore and higher, either alone or in collaboration with other card-issuing banks/NBFCs. After RBI’s approval, Urban Cooperative Banks (UCBs) with a minimum net value of Rs 100 crore and a core banking solution can offer credit cards.
- NBFCs with a minimum net owned fund of Rs 100 crore will need special RBI authorization to issue a credit, debit, or charge cards virtually or physically.
- The regulator has instructed banks to make sure that past-due interest is not added to the loan’s principal, resulting in negative amortization.
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- Unpaid charges, levies, and taxes have also been asked not to be capitalized to compound interest.
- In case, an unsolicited card is issued, an 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.
- Besides, the person in whose name the card is issued can also approach the RBI Ombudsman who would determine the amount of compensation payable by the card issuer to the recipient of the unsolicited card as per the provisions of the Ombudsman Scheme.
- Before the activation of the card, banks are also prohibited from sharing any information with credit information businesses. Moreover, any credit information linked to inactive credit cards that have already been reported to credit information providers will be withdrawn immediately.
- Customers can only be contacted by card issuer representatives between the hours of 10 a.m. and 7 p.m.
- Banks must honor requests to close credit cards, contacting customers by email, SMS, or other means as soon as possible.
- Customers must be offered various options for closing their cards, including a helpline, dedicated email address, Interactive Voice Response (IVR), a clearly visible link on the website, internet banking, mobile banking, or any other mode, and they cannot insist on a single option.
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- Failure by card issuers to complete the closure process within seven working days would result in a penalty of Rs 500 per day of delay payable to the consumer until the account is closed, assuming there are no outstanding balances.
- If a credit card has not been used for more than a year, the cardholder will be notified and the procedure to terminate the card will begin. If the cardholder does not respond within 30 days, the card account will be canceled by the card issuer, subject to the cardholder’s payment of all dues.
- Any credit amount remaining in credit card accounts after the account is closed will be transferred to the cardholder’s bank account.