Reserve Bank of India (RBI) has tightened the rules for credit card issuers like banks and new entrants such as regional rural banks and non-bank financial companies (NBFCs), with a thrust on transparency in interest rates and penalties for flouting norms.  

NBFCs have to get prior permission from RBI before issuing cards.

The regulator has said that the issue of unsolicited cards and upgradation of existing cards without prior consent from customers is prohibited. In case this regulation is flouted, the card issuer will have to reverse the charges and pay a penalty double the billed amount. 

The central bank has also insisted on transparency in rates and the cost to customers who revolve their repayments.

Card issuers must seek OTP-based (one time password) consent from the customer for activating a credit card. If the same is not activated by the customer for more than 30 days from the date of issuance, then the card must be closed without any cost to the customer within seven days of the bank seeking confirmation. If it is an active card, the dues have to be paid by the cardholder.

As per the rules set by the RBI, failure on the part of the card-issuers to complete the process of closure within seven working days shall result in a penalty of Rs 500 per day of delay payable to the customer, till the closure of the account provided there is no outstanding in the account.

If a credit card has not been used for a period of more than one year, the process to close the card shall be initiated after intimating the cardholder. If no reply is received from the cardholder within a period of 30 days, the card account shall be closed by the card-issuer, subject to payment of all dues by the cardholder. The information regarding the closure of card account shall also accordingly be updated with the Credit Information Company/ies within a period of 30 days. 

RBI has asked all issuers not to use strong arm tactics for recovery of dues. Often banks and NBFCs use third party agents to recover money. The central bank has asked card issuers not to resort to harassment and intimidation of the customers. The regulator has also asked the issuers to desist from any action that could damage their integrity and reputation.

 RBI has allowed issuers to sell cards that are linked to an overdraft account that are in the nature of personal loans without any end-use restrictions. This is subject to conditions as stipulated in the overdraft account. 

The Reserve Bank has also allowed the issuance of business credit cards for business related expenses. The business credit cards, RBI said, should be issued as charge cards or by linking the credit facility such as overdraft or cash credit provided for business purpose stipulated for the facility concerned. Corporate credit cards can be issued together with add-on cards wherever required.

On 21 April, the RBI issued master directions for the issuance of credit and debit cards. The provisions relating to credit cards under the RBI (Credit Card and Debit Card - Issuance and Conduct) Directions, 2022 shall apply to every Scheduled Bank (excluding Payments Banks, State Co-operative Banks and District Central Cooperative Banks) and all NBFCs operating in India.