The Reserve Bank of India has issued new rules and criteria for the usage of credit and debit card users. These new rules include new restrictions addressing credit card cancellation, billing, etc.
The RBI states that all the credit and debit card data which is being used for online, in-app, and point-of-sale transactions must be replaced by unique tokens, i.e., the OTP will be generated on every transaction.
These guidelines were issued in April 2022 but came into effect on 1st October 2022. It is mandatory for banks and other credit and debit card users to follow the guidelines. The following are the three new credit card rules:
1. Card-issuers to seek One Time Password (OTP)
Card issuers should seek One Time Password (OTP) based consent from the cardholder for activating a credit card if the same has not been activated by the customer for more than 30 days from the date of issuance. In case of no consent, card issuers will have to close the credit card account without any cost to the customer within seven working days from the date of seeking confirmation from the customer.
2. Rate of interest
The terms and conditions for payment of credit card dues, including the minimum amount due, shall be stipulated to ensure there is no negative amortization. An illustration is included in the Annex.
The unpaid charges/levies/taxes shall not be capitalised for charging/compounding of interest, as stated in RBI’s master circular.
3. Credit limit approval
Card issuers must make sure that the credit limit that has been approved and notified to the cardholder is never exceeded without the cardholder's express permission.
Individuals used to receive only messages regarding credit limit increases. After October 1, 2022, the card issuer will not increase the credit limit without the cardholder's written consent.
Earlier in the year, RBI issued guidelines for credit and debit card users which included some relaxation and user-friendly guidelines for the users, which are as follows:
- Banks cannot levy hidden charges on credit cards issued free of cost.
- Card issuers can purchase insurance coverage for liabilities arising due to the loss of credit cards or credit card fraud. However, to facilitate this insurance coverage, the issuer will have to take permission from the cardholder.
- If an individual fails to activate the credit card within 30 days of issuance, OTP verification will be mandatory for its activation. This will help reduce cases where an unauthorised person tries to access a credit card before it reaches the hand of the actual user.
- As per RBI credit card rules, credit reports about any cardholder must not reach credit bureaus like Experian, CRIF, CIBIL, etc., before the card's activation.
- Banks must be transparent regarding the conversion of credit card transactions into EMIs. They should mention the principal amount, interest rate, additional charges, and more details.
- The monthly statements or bills must separately include details related to EMI conversions.
- RBI's new guidelines instruct all credit card issuers to mention the reason for the rejection of every credit card application.