RBI/2010-11/109
DBOD. FSD.BC.No. 25 /24.01.011/2010-11
July 9, 2010
All Scheduled Commercial Banks / NBFCs
(excluding RRBs)
Dear Sir/Madam
Credit Card Operations of Banks
As banks are aware, Reserve Bank of India has issued comprehensive guidelines
on credit card operations of banks, from time to time. These guidelines are also
compiled in the form of a Master Circular issued every year, the last being the
circular
DBOD.No.FSD.BC.16/24.01.011/2009-10 dated July 1, 2010. The guidelines
on credit card operations cover various aspects such as issue of credit cards,
interest rates and other charges, wrongful billing, use of Direct Sales Agents
(DSAs)/Direct Marketing Agents (DMAs) and other agents, protection of customer
rights covering among other things right to privacy, customer confidentiality
and fair practices in debt collection, redressal of customer grievances,
internal control and monitoring systems, fraud control etc. Banks have been
advised as part of the said guidelines that Reserve Bank of India reserves the
right to impose penalty on a bank/NBFC under the provisions of the Banking
Regulation Act, 1949/the Reserve Bank of India Act, 1934, respectively for
violation of any of these guidelines.
2. Banks have also been advised vide our circular no.
DBOD.No.Dir.BC.93/13.03.00/2006-07 dated May 7, 2007 that they should prescribe
a ceiling rate of interest, including processing and other charges in respect of
small value personal loans and loans similar in nature. The above instructions
are applicable to credit card dues also. In case, banks / NBFCs charge interest
rates which vary based on the payment / default history of the cardholder, there
should be transparency in levying of such differential interest rates. In other
words, the fact that higher interest rates are being charged to the cardholder
on account of his payment / default history should be made known to the
cardholder. For this purpose, the banks should publicise through their website
and other means, the interest rates charged to various categories of customers.
Banks / NBFCs have also been advised that they should indicate to the credit
card holder upfront, the methodology of calculation of finance charges with
illustrative examples, particularly in situations where only a part of the
amount outstanding is paid by the customer.
3. Despite the issue of comprehensive instructions as above to banks, it is
observed that Reserve Bank of India and the Offices of the Banking Ombudsmen,
continue to receive numerous complaints from credit card holders regarding the
credit card operations of the banks, especially with regard to excessive finance
charges, issuance of unsolicited credit cards, unsolicited insurance policies
and recovery of premium charges, charging of annual fee in spite of being
offered as ‘free’ cards, issuance of loans over phone, disputes over wrong
billing, settlement offers conveyed telephonically, non-settlement of insurance
claims after the demise of the card holder, offensive calls, difficulty in
accessing the credit card issuers and the poor response from the call centres
etc.
4. All banks are, therefore, once again advised to strictly adhere to the
guidelines contained in the Master Circular on Credit Card Operations, both in
letter and spirit, failing which Reserve Bank of India shall be constrained to
initiate suitable penal action, including levy of monetary penalties, under the
relevant statutory provisions.
Yours faithfully,
(A.K. Khound)
Chief General Manager