The Reserve Financial institution of India (RBI) has launched instructions on issuing credit score and debit playing cards, aiming to empower card customers and examine misconduct of issuers. Mint examines the important thing factors and their implications:
What are the brand new card guidelines?
RBI has consolidated outdated circulars right into a grasp round, primarily to guard buyer curiosity and rein within the misconduct of card issuers. Non-bank lenders should search RBI nod earlier than issuing bank cards, and comply with strict rules on sharing information even with their co-branding companions. The round lays down the governance framework for issuing playing cards, underwriting requirements, closure, rates of interest, and different prices. It has additionally outlined guidelines round buyer conduct, below which issuers should be sure that brokers chorus from dangerous restoration practices. Moreover, the grasp instructions stipulate time-bound closure of inactive playing cards.
What ought to clients know?
The rules empower bank card clients, mandate lenders to take consent of shoppers on varied points pertaining to bank cards, and in addition strengthen the grievance redressal mechanism. Card issuers want to supply clients with a web page itemizing key information akin to rate of interest and different prices on the time of software. In case an software is rejected, the issuer is certain to specify the rationale for the rejection in writing. Prospects can report cases of receiving unsolicited bank cards to RBI and declare compensation. As per the brand new guidelines, issuers might supply insurance coverage cowl, on the discretion of the client.
How would non-bank lenders profit?
Non-bank lenders are allowed to concern bank cards with no banking accomplice after regulatory approval. Analysts imagine that giant non-banking monetary corporations, which have already got a big buyer base, might apply for a bank card licence. Bajaj Finance, which presently has a tie-up with DBS Financial institution and RBL Financial institution, mentioned it’s finding out the rules.
What occurs to co-branded playing cards?
Card issuers should be sure that cash-backs, reductions, and different gives marketed by a co-branding accomplice are delivered to the cardholder on time. Issuers might be responsible for any delay or non-delivery. The position of the co-branding accomplice below the tie-up association can solely be restricted to advertising/distribution of the playing cards and offering entry to the cardholder for the products/providers which are provided. They can’t entry info regarding transactions undertaken by the co-branded card. The purpose is to stop misuse of consumer information.
Will penal prices go down?
Some lower in penal prices is probably going. Card issuers can report a bank card account as ‘late’ (overdue) to credit score info companies or levy penal prices solely when a bank card account stays ‘late’ for greater than three days. RBI has indicated that penal curiosity cost levied ought to be computed on steadiness excellent and from the cost due date reasonably than the present follow of charging penal curiosity on the total quantity and from the invoice date. CLSA estimates that late cost prices represent 30-35% of charges on bank cards.
Supply: Live Mint