RBI Cracks Down on Banks with Credit Card Regulations

A fortnight after landmark ruling by the Consumer Court on Credit Card APRs, the Reserve Banks of India worked round the clock and has cracked down on Banks and Financial Institutions with new set of Regulations. Our analyst in Mumbai was able to obtain the same and here are the RBI's recommendations. [Our comments appear in Italics]

• Issuing of Credit Cards [CC]: Banks have to asses the risk independently while issuing cards to persons, especiallyunemployed and others with no independent financial means. [This means that CIBIL will have more inquiries from CC issuing companies. Kindly maintain Good Credit History henceforth.] What is CIBIL ? Read here.
  
• Reasons for Rejection of CC Application: CC issuing companies are required to explain the reason for CC rejection to a potential customer if his CC application was rejected. [Fantastic Move, but will the banks comply ? ]
• End to Unsolicited Credit Cards: We have read on Credit Card forum that companies like ICICI have sent Unsolicited CCs which never reached the customer and the customer was left to the misery of recovery agents / goons [ RBI has asked the banks to end the mess else face them ]
• Protection Against Unsolicited CCs: Any loss incurred by banks due to the issue of unsolicited cards is the responsibility of banks and consumer is FREE from any charges levied against him.
• CC Safety Measures: Issue CCs with Photos. Laminate Signatures on the backside and an optional PIN for all CCs in-line with Mastercard SecurePay which is already in force for Internet Transactions. [These are just recommendations and are not mandatory. However, we would have been really happy had the RBI made this mandatory.]
  
• CC Billing Statements: Customers should get their statements well in advance so that they have time to pay. Also banks should have a means of acknowledgment that the statement was delivered to the consumer. [It would have been nice had RBi stated the number of days before the due date the customer should have CC Bill in his hands]
• Insurance Cover: On CCs where banks are offering insurance cover to credit card holders, in tie-up with insurance companies, banks may consider obtaining in writing from the credit card holder the details of nominee/s for the insurance cover in respect of accidental death and disablement benefits. [Insurance Cover on most cards is a gimmick, RBI must instruct banks to reduce the fine print accompanying such gimmicks]
  
• Transparency in Fees and APRs: Banks have to clearly communicate to the customer on Charges and Fees on CC and also explain the procedure for calculating APRs. [We want the RBI to fix ceiling of maximum 18% APR on CCs and we have already written about the same to them.]
• Reporting Defaulters to CIBIL: Before reporting to CIBIL about defaulting customers, the banks are supposed to inform the consumer about the same. [But you should see with what arrogance officers in ICICI talk when you raise grievance that you were not informed. RBI must literally make these blood sucking banks to spend and adhere to fair business practices]

We should be happy atleast the RBI has woken up to save the consumers though we may not see a sudden compliance from Banks with RBI guidelines. However, as an informed CC user you now know your rights and can demand service. Write back to us if you have any problem. feedback @ cardbhai dot com.

Credit Card Interest Ceiling at 30% - Consumer Court

In a landmark judgment, the National Consumer Disputes Redressal Commission has ruled that Credit Card APR or Interest Rates in excess of 30% in India is illegal. Additionally, they have said, penal interest can be charged only once for one period of default and shall not be capitalized.

You are already aware that Indian Credit companies like ICICI are charging 49% interest rate. Thsi is a severe blow to such Banks and Credit Card companies who have no ethical practices in place. The court also said,

In our view, there is no justifiable ground for adopting the highest rate of interest prevailing in smaller economies. Further, there is no justifiable ground in not even attempting to follow what is prevailing in developed countries.

This order was very much essential as the Nations financial watchdog, RBI is either in deep slumber or officials related to supervision of credit card Interest rates are under the influence of corruption, which needs immediate attention and investigation.