RBI issues fresh directives to banks on credit cards operations -Action against banks which fail to follow the guidelines

Reserve Bank of India and the Offices of the Banking Ombudsmen, continue to receive numerous complaints from credit card holders regarding the credit card operations of the banks, especially with regard to excessive finance charges, issuance of unsolicited credit cards, unsolicited insurance policies and recovery of premium charges, charging of annual fee in spite of being offered as ‘free’ cards, issuance of loans over phone, disputes over wrong billing, settlement offers conveyed telephonically, non-settlement of insurance claims after the demise of the card holder, offensive calls, difficulty in accessing the credit card issuers and the poor response from the call centres etc.



Reserve Bank of India has issued comprehensive guidelines on credit card operations of banks, from time to time. The guidelines on credit card operations cover various aspects such as issue of credit cards, interest rates and other charges, wrongful billing, use of Direct Sales Agents (DSAs)/Direct Marketing Agents (DMAs) and other agents, protection of customer rights covering among other things right to privacy, customer confidentiality and fair practices in debt collection, redressal of customer grievances, internal control and monitoring systems, fraud control etc.

Banks have been advised by RBI in May 2007 that they should prescribe a ceiling rate of interest, including processing and other charges in respect of small value personal loans and loans similar in nature. The above instructions are applicable to credit card dues also. In case, banks / NBFCs charge interest rates which vary based on the payment / default history of the cardholder, there should be transparency in levying of such differential interest rates.



In other words, the fact that higher interest rates are being charged to the cardholder on account of his payment / default history should be made known to the cardholder. For this purpose, the banks should publicise through their website and other means, the interest rates charged to various categories of customers. Banks / NBFCs have also been advised that they should indicate to the credit card holder upfront, the methodology of calculation of finance charges with illustrative examples, particularly in situations where only a part of the amount outstanding is paid by the customer.

RBI has advised in the notification to banks that failure to strict adherence to the guidelines on Credit Card Operations can result in penal action, including levy of monetary penalties.

The country’s credit card number fell to 18.28 million as on March 31,2009 from a peak of 28.3 million in April 2008, according to RBI data. Credit cards are issued by many banks including ICICI Bank, HDFC Bank, SBI Cards, Punjab National Bank, Standard Chartered, HSBC, Citibank etc.

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