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RBI's New Guidelines for Debit and Credit Card Users: Here is what you need to know

April 21, 2023

Table of Contents

    Table of Contents

      The RBI published new guidelines for debit and credit cards, which will go into effect on July 1. This article discusses the various guidelines, grievances and more.

      The Reserve Bank of India (RBI) has issued new guidelines on debit and credit cards, governing India's debit and credit card transactions.

      As of July 1, 2022, these new standards will be in effect, completely rewriting the norms that currently apply to banks and non-banking financial institutions (NBFCs).

      What does that mean? We'll break it down for you:

      For banks issuing or updating users' cards without their authorization, RBI has introduced penalties. In addition, debit and credit card laws have been updated.

      Non-banking financial institutions (NBFIs) can now offer credit cards with regulator clearance.

      The regulator has instructed banks to prevent negative amortisation by not adding past-due interest to the principal sum of the loan.

      In addition, unpaid charges, levies, and taxes should not be capitalised for the purpose of compound interest, according to a request to banks by the government.

      All scheduled banks like financial institutions and NBFCs will be subject to the RBI new rules once they go into effect on July 1, 2022 - don't forget!

      What do the new RBI guidelines entail?

      According to the new RBI guidelines, they have  issued fines for banks and NBFCs that do not adhere to them.

      In addition, the RBI will impose a penalty on any bank that issues or upgrades debit or credit cards to consumers without their authorization.

      Only banks with a net wealth of Rs 100 crore are allowed to start up credit card activity under the norms of the Reserve Bank of India.

      However, the banks can run the business independently or in conjunction with other card-issuing institutions or NBFCs.

      UCB (Urban Cooperative Banks) with a minimum net wealth of Rs 100 crore have been granted permission by the RBI to set up credit card companies after obtaining approvals from the regulator.

      However, UCBs should have a conventional banking platform in order to operate.

      The UCBs can no longer issue co-branded credit cards under RBI's new regulations. Here is a detailed breakdown of the guidelines

      Credit cards can be issued by RRBs having a net worth of more than Rs 1000 crore in partnership with their sponsoring bank or other financial institutions.

      The RBI new regulation states that "NBFCs shall not provide debit cards, credit cards, charge cards, or related products virtually or physically" without first obtaining authorization from the central bank of India.

      For example, the RBI has required banks to offer customers the choice to disable or block form factors via mobile banking, online banking or any other method of communication. Here are the RBI rules and regulations for each card:

      Credit Card changes:

      • Unsolicited card distribution or card upgrades are strictly forbidden. A card issuer must pay the penalty equal to twice the amount of charges reversed if a card is issued without the customer's agreement or if an existing card is updated and activated without the customer's consent (a bill is produced).
      • It is the card-exclusive issuer's responsibility if any of these cards are misused before they reach the intended recipients.
      • Before such a credit card could be issued, the applicant must obtain express authorization for its issuance in writing. They must inform the Reserve Bank of India if digital means are used instead of written approval.
      • Card issuers and 3rd-party agents have been instructed not to use intimidation or harassment when attempting to collect overdue fees.

      Debit Card new rules:

      • As per the RBI guidelines for current account, only consumers with savings or current bank accounts are eligible for debit cards.
      • The issuance of a debit card is not linked to any other bank service, and customers cannot be forced to use it.
      • When a credit card is lost or stolen (credit or debit), the card issuer must immediately block a lost card.
      • Details on how to report a lost, stolen, or unauthorised use of a card or PIN should be provided by card issuers. In addition to a dedicated hotline and SMS/email/interactive voice response channels, there should be a clear link on the company's website, online banking and a mobile app, or some other 24x7 reporting method.
      • Immediately after a card is blocked, the card-issuing company must send a confirmation to the cardholder.
      • READ: New restrictions for online payments will take effect on January 1. To get started, here's what you need to know:

      General guidelines for issuing credit cards

      • Replacement cards cannot be issued without the customer's express permission in the event of a blocked card. To make things even more complicated, the cardholder must give their permission before the card may be renewed.
      • There should be a clear and easy language used to describe the terms and conditions of a card's issue and use, preferably in English and Hindi, as well as the region's language.
      • If a convenience fee is applied to a particular transaction, the cardholder will be made aware of it beforehand.
      • Reversing failed or unsuccessful transactions must be possible within a specific time period, and any compensation due in the event that this time period is not met must be indicated explicitly.
      • Card issuers can change the terms at any time, but cardholders must be given 30 days' notice before any changes take effect so they can opt out if they so desire.
      • The International Monetary Fund (IMF) has urged India to do this in order to increase its GDP growth potential.

      On grievances:

      • Card issuers are required to set up a system and publicise it extensively. The appointed grievance redressal officer's name, direct phone number, email address, and postal address must appear on the credit card bills and financial records. Complaints from cardholders must be dealt with immediately and without delay by the designated officer.
      • Card issuers must ensure that their customer service representatives are properly educated to manage and escalate complaints. Even if concerns are received over the phone, there must be a procedure in place to acknowledge them and follow up on them.
      • To recompense the complainant for time, expenses, loss of money, as well as annoyance and mental agony caused by the card-negligence issuer and where the complaint has still not been redressed promptly, the card-issuers shall be held accountable. Within one month of making a complaint, if the card-issuer does not satisfactorily respond to the complainant, they can contact the Reserve Bank of India (RBI).

      Regarding the security of customer data

      • Card issuers are not allowed to disclose client information without their permission. Information about how the data is used and who it is shared with is critical for customers to understand.
      • Customers' requests for information cannot be interpreted as a violation of laws governing the confidentiality of transactions. The accuracy of the data given for this purpose is solely the responsibility of the card issuers.

      Who has the authority to issue cards?

      It is specified in the guidelines that financial institutions are permitted to offer credit and debit card services.

      SCBs with a 100-crore-plus net worth can typically issue credit cards. Regional Rural Banks (RRBs) are the exception, as they must work with other banks in order to do so.

      The same holds for urban cooperative banks having a net worth of more than Rs. 100 crores, which may issue cards if they meet specific criteria.

      For example, they can only give credit cards to organisational members. Additionally, as per the rules of RBI for current accounts, they are prohibited from issuing co-branded credit cards.

      They may not loan out more than 10% of their total assets in the form of unsecured loans and advances.

      Final Thoughts:

      Reserve Bank-registered non-banking financial institutions (NBFCs) can issue credit cards when they have a Certificate of Registration and authorization to enter the market, as per the credit card rules.

      According to RBI announcements, the card-issuer cannot reveal any information collected from the consumer when opening an account or issuing a card without the customer's express authorization.