In an effort to streamline the use of credit and debit cards, the Reserve Bank of India (RBI) has recently introduced a series of amendments to the regulations governing these financial instruments. These changes, aimed at enhancing transparency and accountability, cover a wide spectrum of aspects, including business credit cards, penalties for card closure delays, form factors in place of debit cards, co-branded cards, compensation for grievances, and data protection guidelines.
Understanding the Amendments
The RBI, under the Banking Regulation Act of 1949 and the Reserve Bank of India Act of 1934, unveiled the revisions on March 7, 2024. The alterations modify the provisions outlined in the Master Direction on ‘Credit Card and Debit Card – Issuance and Conduct Directions, 2022’, issued on April 21, 2022. The amended regulations apply to all credit card issuing banks and non-banking financial companies (NBFCs). Instructions concerning debit cards are applicable to all banks operating in India.
Business Credit Cards
Business credit cards issued by card-issuers can be linked to a credit facility such as an overdraft or cash credit provided for business purposes as per the terms and conditions stipulated for the facility concerned. The card-issuers must put in place an effective mechanism to monitor the end use of funds. It’s noteworthy that business credit cards can be issued together with add-on cards wherever required.
Card Closure Delays
Failure on the part of the card-issuers to complete the process of closure within seven working days will result in a penalty of ₹500 per calendar day of delay payable to the cardholder. This penalty will be levied until the closure of the account provided there is no outstanding amount in the account.
Interest Calculation
Card-issuers are required to inform cardholders about the implications of paying only the ‘minimum amount due’. The interest will only be charged on the remaining amount after adjusting for payments, refunds, or reversed transactions.
Authorised Payment Modes
Card issuers must list authorised payment modes for credit card dues on their websites and billing statements. Cardholders should be advised to be cautious and avoid using unauthorised payment methods.
Card Suspension
If card-issuers decide to block, deactivate, or suspend a card, they must follow a standard operating procedure approved by their Board. Cardholders must be promptly informed of such actions along with reasons through electronic means such as SMS or email.
Co-Branding with Card-Issuers
Banks (including Payments Banks, State Co-operative Banks and District Central Co-operative Banks) and NBFCs registered with the RBI (NBFCs – ICC, HFC, Factor, MFI, and IFC) can become a co-branding partner of card-issuers without prior approval. The role of the co-branding partner will be as per the conditions stipulated under para 21.
Impact on Customers
The changes in credit and debit card rules by the RBI will have a profound impact on the customers. Let’s discuss some of the significant effects these changes will bring.
Flexibility in Billing Cycle
One of the major changes brought about by the RBI is giving customers the option to modify the billing cycle of their credit card at least once as per their convenience. This provides a significant degree of flexibility to the cardholders, allowing them to choose a billing cycle that suits their financial situation and cash flow.
Transparency in Transactions
Another significant change is the introduction of more transparency in transactions. Card-issuers are now required to inform the cardholders of the implications of paying only the ‘minimum amount due’. This includes prominently displaying a warning on all billing statements to caution cardholders about the pitfalls of paying only the minimum amount due.
Protection of Cardholder Data
The RBI has also taken steps to ensure the protection of cardholder data. Card-issuers are now prohibited from revealing any information relating to customers obtained at the time of opening the account or issuing the card to any other person or organization without obtaining their explicit consent.
Conclusion
The changes in RBI Credit Cards Rules are indeed a big relief to millions of credit and debit card users across the country. With enhanced transparency, more flexibility, and better protection of cardholder data, these new rules will go a long way in making credit and debit card usage more user-friendly and secure.
For more updates on financial news and investment tips, stay tuned to paisainvests.com. Remember, a well-informed investor is a successful investor.
Disclaimer: The articles on PaisaInvests.com are solely for educational purposes. While we endeavor for accuracy, we make no guarantees regarding completeness or reliability. Readers are advised to conduct their own research and seek professional advice before making any financial decisions. We are not liable for any loss or damage incurred from the use of information provided. Additionally, we do not control the content of external websites linked within our articles.
