APR Ceiling on Credit Cards proposed by Law Makers

Time and Again, it has been discussed openly and banks / financial institutions being criticized for charging Credit Card APRs abnormally high from 24% PA to 48% PA. Their argument,

Credit card dues are of nature of non-priority sector personal loans and banks are free to determine the rate of interest on credit card dues on their own without reference to their benchmark prime lending rate.

But the RBI has instructed the banks to have reasonable service charges and APRs. However, that has not come into practice and thus the Parliament Committee undertook a study on the facts and recommended that,

The RBI should review this matter and re-formulate their guidelines or norms governing credit card services with a view to providing the much needed relief to the public, the committee said in its report. Many credit card companies charge interest rates of nearly 3% a month for credit card outstanding , which on annualising works out to more than 40% per annum.

With Credit Bureaus & Reports now a reality in India, things should be made smoother for consumers in good standing. Once again the final say is in the hands of Dr. Manmohan Singh who can refuse to accept the recommendations of the parliament committee. Lets be positive and hope that he doesn’t oppose and votes for the recommendations and puts the ball in RBI’s office sooner 🙂

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