The Reserve Bank of India (RBI) released master directions for credit and debit card issuance on April 21. The RBI (Credit Card and Debit Card - Issuance and Conduct) Directions, 2022 shall apply to all Scheduled Banks (except Payments Banks, State Co-operative Banks, and District Central Cooperative Banks) as well as all Non-Banking Financial Companies (NBFCs) operating in India. The new directions shall be effective from July 01, 2022.
"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," RBI stated through its media release.
Take a look at RBI's new guidelines for credit card issuers:
1) 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.
2) Banks not to issue unsolicited credit cards or upgrade an existing card without the explicit consent of the customer, failing which they will have to pay double the billed amount as penalty.
2) Card issuers and third-party agents not to resort to intimidation or harassment during recovery of dues from customers.
3) With regard to recovery of dues from customers, the RBI has asked the issuers to ensure that they and their agents adhere to the fair practices code for lenders
4) With regard to appointment of third-party agencies for debt collection, the card-issuers shall ensure that their agents refrain from actions that could damage their integrity and reputation and observe strict customer confidentiality.
5) Card-issuers/their agents shall not resort to intimidation or harassment of any kind, either verbal or physical, against any person in their debt collection efforts, including acts intended to humiliate publicly or intrude upon the privacy of the credit cardholders' family members, referees and friends, making threatening and anonymous calls or making false and misleading representations.
6) The issue of unsolicited cards/upgradation is strictly prohibited
7) In case an unsolicited card is issued or an existing card upgraded and activated without the explicit consent of the recipient, the card issuer will have to reverse the charges and pay a penalty double the billed amount.
8) Commercial banks with net worth of over Rs 100 crore can undertake credit card business either independently or in tie-up arrangement with other card issuing banks/NBFCs.
9) Regional rural banks (RRBs) are also permitted to issue credit cards in collaboration with their sponsor bank or other banks.
10) 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, for loss of complainant's time, expenses incurred, harassment and mental anguish suffered by him/her.
11) Non-banking financial companies (NBFCs) shall not undertake credit card business without its prior approval.
12) Without obtaining prior approval from the Reserve Bank, NBFCs are not supposed to issue debit cards, credit cards, charge cards, or similar products virtually or physically.
13) Card-issuers shall seek One Time Password (OTP) based consent from the cardholder for activating a credit card, if the same has not been activated by the customer for more than 30 days from the date of issuance. If no consent is received for activating the card, 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.
14) Card-issuers may consider introducing, at the option of the customers, an insurance cover to take care of the liabilities arising out of lost cards, card frauds, etc. In cases where the card-issuers are offering any insurance cover to their cardholders, in tie-up with insurance companies, the card-issuers shall obtain explicit consent in writing or in digital mode from the cardholders along with the details of nominee/s.
15) No card-issuer shall report any credit information relating to a new credit card account to Credit Information Companies prior to activation of the card. Any credit information relating to such inactivated credit cards already reported to Credit Information Companies shall be withdrawn immediately; under no circumstances it shall take more than 30 days from the effective date of these directions.
16) Card-issuers shall ensure complete transparency in the conversion of credit card transactions to Equated Monthly Instalments (EMIs) by clearly indicating the principal, interest and upfront discount provided by the merchant/card-issuer (to make it no cost), prior to the conversion. The same shall also be separately indicated in the credit card bill/statement. EMI conversion with interest component shall not be camouflaged as zero-interest/no-cost EMI.
17) Card-issuers shall ensure that loans offered through credit cards are in compliance with the instructions on loans and advances issued by the Reserve Bank from time to time.
18) Card-issuers shall ensure that the credit limit as sanctioned and advised to the cardholder is not breached at any point in time without seeking explicit consent from the cardholder.
19) Card-issuers may issue credit cards/charge cards to individuals for personal use together with add-on cards wherever required.
20) 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.
21) 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.
22) 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 pertaining to Advances.
23) Any request for closure of a credit card shall be honoured within seven working days by the credit card-issuer, subject to payment of all dues by the cardholder. Subsequent to the closure of the credit card, the cardholder shall be immediately notified about the closure through email, SMS, etc. Cardholders shall be provided an 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. The card-issuer shall not insist on sending a closure request through post or any other means which may result in the delay of 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 ₹500 per day of delay payable to the customer, till the closure of the account provided there is no outstanding in the account.
24) 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
25) Card-issuers shall quote Annualized Percentage Rates (APR) on credit cards for different situations such as retail purchases, balance transfer, cash advances, non-payment of minimum amount due, late payment etc., if different.
26) There shall not be any hidden charges while issuing credit cards free of charge.
Here are the master directions for debit card issuance:
1) Banks shall formulate a comprehensive debit cards issuance policy with the approval of their Boards and issue debit cards to their customers in accordance with this policy. Prior approval of the Reserve Bank is not necessary for banks desirous of issuing debit cards to their customers.
2) Debit cards shall only be issued to customers having Savings Bank/Current Accounts.
3) Banks should not force a customer to avail debit card facility and should not link issuance of debit card to availment of any other service from the bank.
4) A co-branded credit/debit card shall explicitly indicate that it has been issued under a co-branding arrangement.
5) The co-branding partner shall not advertise/market the co-branded card as its own product
6) In all marketing/advertising material, the name of the card-issuer shall be clearly shown
7) NBFCs desirous of entering into a co-branding arrangement for issue of credit cards will also come under the guidelines.
8) Banks shall provide options for disabling or blocking the form factor through mobile banking, internet banking, SMS, IVR or any other mode.
9) Scheduled Commercial Banks (other than RRBs) may issue other form factors in place of a plastic debit card such as wearables after obtaining explicit consent from the customer.
10) No bank shall issue debit cards to cash credit/loan account holders. However, it will not preclude the banks from linking the overdraft facility provided along with Pradhan Mantri Jan Dhan Yojana accounts with a debit card.
The RBI in its circular also asked card issuers to put in place a grievance redressal mechanism and publicise it widely.
It is further stated that card issuers shall ensure that their call centre staff are trained adequately to competently handle and escalate a complaint, if necessary.
Further, it said card issuers will be liable to compensate the complainant for the loss of his/her time, expenses, financial loss as well as for the harassment and mental anguish suffered for the fault of the card issuer and where the grievance has not been redressed in time."If a complainant does not get satisfactory response from the card-issuer within a maximum period of one month from the date of lodging the complaint, he/she will have the option to approach the Office of the concerned RBI Ombudsman for redressal of grievances," it added.