In the year 2022, RBI has issued master guidelines for credit and debit card issuance. These new regulations will take effect on July 1, 2022. Commercial bank, state co-operative banks, and district central co-operative banks are exempt from the criteria. In addition, all NBFCs registered in India should adhere to the new card issue regulations.
The RBI has changed the rules regulating 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 businesses (NBFCs) to issue credit cards with the regulator's previous approval.
The regulator has instructed banks to make sure that past-due interest is not added to the loan's principal, resulting in negative amortisation. Unpaid charges, fines, and taxes have also been asked not to be funded for the purposes of compounding interest.
The new guidelines will take effect on July 1, 2022, and will apply to all regulated banks and non-bank financial companies. Credit card activity is permitted for banks with a market value of Rs 100 crore and higher, either alone or in collaboration with other card issuing banks/NBFCs. After RBI 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 credit, debit, or card services virtually or practically. For the first time, the RBI singled out the unilateral issue or upgrade of cards, putting the responsibility on banks to cover any liabilities emanating from such issuances.
If an anonymous card is issued/an existing card is upgraded and activated without the recipient's explicit consent and the latter is expensed for it, the card-issuer shall not only reverse the charges as soon as possible, but also pay a penalty without relent to the recipient equal to twice the amount of the charges reversed. In addition, the individual in whose name the card is issued can file a complaint with the RBI Ombudsman, who will decide the level of compensation receivable by the card-issuer to the recipient of the unsolicited card, based on the provisions of the Ombudsman Scheme, such as for lost time, expenses, intimidation, and emotional distress suffered by the complainant, RBI mentioned.
If a credit card has not been activated by the user for more than 30 days from the date of issuance, card issuers must get One Time Password (OTP)-based permission from the cardholder before activating the card. If the consumer does not consent to the card being activated, the credit card account will be canceled without charge to the customer within seven working days of the customer's confirmation - According to the RBI.
Prior to the registration of the card, banks are also prohibited from sharing any information with credit - reporting businesses. The RBI stated that any credit information linked to inactive credit cards that has already been submitted to credit information providers will be withdrawn immediately.
Users can only be contacted by card issuer employees between the hours of 10 a.m. and 7 p.m.
Banks must honour 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, online banking, mobile banking, or any other means, and they cannot insist on a single option.
Failure by card issuers to execute the closure process within seven working days would result in a penalty of Rs 500 per day of delay charged to the consumer until the account is closed, assuming there are no outstanding balances. If a credit card wasn't used for more than a year, the cardholder will be notified and the procedure to terminate the card will begin. The card account will be cancelled by the card-issuer if no response is received from the user within 30 days, subject to settlement of all dues by the cardholder.
Any credit amount remaining in credit card accounts after the account is closed will be moved to the cardholder's bank account.
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