What has happened?
- Written consent will be required for all applicants for a credit card, according to new guidelines issued by the RBI that will be effective from July 1, 2022.
- The guidelines, officially known as the Reserve Bank of India (Credit Card and Debit Card – Issuance and Conduct) Directions, 2022, Provide a thorough set of instructions primarily to card-issuers about issuing credit and debit cards, co-branded cards, billing, and telemarketing, among other matters.
Who can issue cards?
- The directions earmark which banks may engage in the credit and debit card business.
- Most Scheduled Commercial Banks (SCBs) with a net worth of Rs. 100 crores can issue credit cards.
- The exception is Regional Rural banks (RRBs) which need to collaborate with other banks to do so.
- Similarly, Urban Cooperative Banks (UCBs) with a net worth of more than Rs. 100 crores can issue cards subject to certain guidelines.
- For example, they can only issue credit cards to members. They cannot issue co-branded credit cards, and the total unsecured loans and advances given by a UCB cannot exceed 10 percent of its assets.
- NBFCs registered with the Reserve Bank with a minimum net owned fund of Rs 100 crores can issue credit cards, provided they have a Certificate of Registration and permission to enter the business.
What about Debit cards?
- All banks can issue debit cards, without needing the approval of the RBI.
- However, debit cards can only be issued to customers with Savings Bank/Current Accounts, and not to cash credit/loan account holders.
- Notably, banks cannot force customers to get a debit card and cannot link this to receiving any other facility from the bank.
- Banks do not need RBI approval to issue co-branded debit or credit cards.
- Any co-branded credit/debit card needs to indicate that it has been issued under a co-branding arrangement, and the co-branding partner cannot market the card as its own.
- Such a partner is limited to marketing and distributing the cards, and to providing access to the goods and services.
Written consent for cards
- Explicit written consent will be required for all cards issued by a card-issuer.
- Alternative digital modes with multifactor authentication can also be used in place of writing, but these need to be communicated to the RBI’s Department of Regulations.
- As per the new guidelines, issuers cannot unilaterally upgrade credit cards and increase credit limits without the explicit consent of the customer for all changes in terms and conditions.
- No unsolicited loans can also be granted without explicit
- No card issuer can send an unsolicited card to a customer unless it’s a replacement or a renewal.
- A replacement card in lieu of a blocked card will also be issued with the explicit consent of the customer. The same applies for the renewal of cards as well.
- Any charges on an unsolicited card without the consent of the customer will be reversed and an additional penalty twice the charged value will be paid by the issuer.
- The person in whose name the card is issued can also approach the RBI Ombudsman for compensation.
Reporting to CIC
- One of the guidelines is that card issuers cannot report any credit information about a new credit card account to Credit Information Companies (CICs) before the activation of the card.
- If any information needs to be provided to a CIC relating to the credit history and repayment record of the cardholder, the issuer needs to explicitly inform the customer that such information is being provided in accordance with the Credit Information Companies (Regulation) Act, 2005.
- The issuer needs to give a seven days’ notice to a cardholder if it intends to report him as a defaulter to a CIC.
- Issuers need to provide a one-page Key Fact statement along with the credit card application with thorough details about the card.
- They must also send the Most Important terms and conditions (MITC) during important communications.
- These include details about all fees and charges, withdrawal and credit limits, billing details, minimum amounts payable, procedures for default, termination, loss or theft of the card, and grievance redressal.
- Card-issuers need to ensure that any telemarketers they engage to promote their services comply with Telecom Regulatory Authority of India (TRAI) regulations, As well as guidelines on Unsolicited Commercial Communications – National Customer Preference Register (NCPR).
- No telemarketer can contact customers outside of a 10:00 a.m. to 7 p.m. window.
- Also, any decisions about issuing cards can only be made by the card-issuer, and not by direct sales or marketing agents, who are only expected to solicit or serve customers.
- Card issuers can also only report a credit card account to CICs or levy charges only if a card account remains past due for more than three days.
- Any penal interest or late payment charges can only be levied on the outstanding amount after the due date and not on the total amount.
- Changes in charges can only be made with prospective effect with one month’s prior notice.
Q) Which is the first bank to introduce credit card in India?
- Canara Bank
- Central Bank of India
- Bank of Baroda
- ICICI Bank