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What are directions on issuance of Credit Cards and Debit Cards?

Reserve Bank of India (RBI) has issued directions on issuance and conduct of credit card and debit card.

What is Credit Card?

Credit Card is a physical / virtual payment instrument issued with a pre-approved revolving credit limit that can be used to purchase goods and services or draw cash advances.

What is Debit Card?

Debit Card is a physical / virtual payment instrument linked to a Saving Bank / Current Account which can be used to withdraw cash, make online payments, do PoS terminal / Quick Response (QR) code transactions, fund transfer, etc.

From when are the directions on issuance of credit card and debit card applicable? 

The directions on issuance and conduct of credit card and debit card are applicable with effect from July 01, 2022.

To whom are the directions applicable?

Provisions relating to credit cards apply to –

  • Every Scheduled Bank (excluding Payments Banks, State Co-operative Banks and District Central Co-operative Banks) operating in India.
  • All Non-Banking Financial Companies (NBFCs) operating in India.

Provisions relating to debit cards apply to every bank operating in India.

Which entities are eligible to issue credit card?

  • Scheduled Commercial Banks (SCBs) other than Regional Rural Banks (RRBs) with net worth of ₹100 crore and above are permitted to undertake credit card business either independently or in tie-up arrangement with other card issuing banks / NBFCs. 
  • SCBs (excluding Small Finance Banks and RRBs) desirous of setting up separate subsidiaries for undertaking credit card business require prior approval of RBI.
  • RRBs are permitted to issue credit cards in collaboration with their sponsor bank or other banks.
  • Financially sound and well managed Scheduled Urban Cooperative Banks (UCBs) with minimum net worth of ₹100 crore which are CBS enabled may issue Credit Cards subject to additional conditions prescribed by RBI.
  • NBFCs registered with RBI shall not undertake credit card business without prior approval of RBI. Any company including a non-deposit taking company intending to engage in this activity requires a Certificate of Registration, apart from specific permission to enter into this business, the pre-requisite for which is a minimum net owned fund of ₹100 crore. Without obtaining prior approval from RBI, NBFCs shall not issue debit cards, credit cards, charge cards, or similar products virtually / physically.

What are directions on issuance of credit card?

  • Card-issuers shall seek One Time Password (OTP) based consent from the cardholder for activating a credit card, if the same has not been activated by the customer for more than 30 days from the date of issuance. If no consent is received for activating the card, card-issuers shall close the credit card account without any cost to the customer within 7 working days from date of seeking confirmation from the customer. (The timeline for implementation of this provisions was extended from July 01, 2022 to October 01, 2022)
  • Any request for closure of a credit card shall be honoured within 7 working days by the credit card-issuer, subject to payment of all dues by the cardholder. Failure on the part of the card-issuers to complete the process of closure within 7 working days shall result in a penalty of ₹500 per calendar 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 more than 1 year, the process to close the card shall be initiated after intimating the cardholder. If no reply is received from the cardholder within 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 be updated with the Credit Information Companies (CICs) within 30 days.
  • Card-issuers shall report a credit card account as 'past due' to CICs or levy penal charges, viz. late payment charges and other related charges, if any, only when a credit card account remains 'past due' for more than 3 days. The number of 'days past due' and late payment charges shall be computed from the payment due date mentioned in the credit card statement. Late payment charges and other related charges shall be levied only on the outstanding amount after the due date and not on the total amount due.
  • Changes in charges shall be made only with prospective effect giving prior notice of at least 1 month. 
  • In case, a cardholder protests any bill, the card-issuer shall provide explanation and, wherever applicable, documentary evidence to the cardholder, within 30 days from the date of complaint.
  • Card-issuers shall seek explicit consent of the cardholder to adjust credit amount beyond a cut-off (1% of the credit limit or ₹5000, whichever is lower) arising out of refund / failed / reversed transactions or similar transactions against the credit limit for which payment has already been made by the cardholder. The consent shall be obtained within 7 days of the credit transaction. The card-issuers shall reverse the credit transaction to the cardholder’s bank account, if no consent / response is received from the cardholder. Irrespective of the cut-off, if a cardholder makes a request to the card-issuer for reversal of the credit amount outstanding in the card account into his / her bank account, the card-issuer shall do it within 3 working days from the receipt of such request.
  • Before reporting default status of a credit cardholder to a CIC, the card-issuers shall intimate the cardholder prior to reporting of the status. In the event the customer settles his / her dues after having been reported as defaulter, the card-issuer shall update the status with CIC within 30 days from the date of settlement. 

What are directions on issuance of debit cards?

  • Prior approval of RBI is not necessary for banks desirous of issuing debit cards to their customers.
  • Debit cards shall only be issued to customers having Savings Bank / Current Accounts.
  • No bank shall issue debit cards to cash credit / loan accounts. However, it does not preclude the banks from linking the overdraft facility provided along with Pradhan Mantri Jan Dhan Yojana accounts or Kisan Credit Card accounts with a debit card.
  • Banks shall not force a customer to avail debit card facility and shall not link issuance of debit card to availment of any other facility from the bank.

What are directions on issuance of co-branded cards?

  • Prior approval of RBI is not necessary for the issuance of co-branded debit cards / co-branded prepaid cards by banks and co-branded credit cards by card-issuers. However, UCBs shall not issue debit / credit cards in tie-up with other non-bank entities. 
  • The co-branded card shall explicitly indicate that the card has been issued under a co-branding arrangement. The co-branded card shall prominently bear the branding of the card-issuer.

Which provisions have been allowed extension?

The timeline for implementation of the following provisions has been extended from July 01, 2022 to October 01, 2022 –

  • Card-issuers shall seek One Time Password (OTP) based consent from the cardholder for activating a credit card, if the same has not been activated by the customer for more than 30 days from the date of issuance. If no consent is received for activating the card, card-issuers shall close the credit card account without any cost to the customer within 7 working days from date of seeking confirmation from the customer.
  • Card-issuers shall ensure that the credit limit as sanctioned and advised to the cardholder is not breached at any point in time without seeking explicit consent from the cardholder.
  • No capitalization of unpaid charges / levies / taxes for charging / compounding of interest.


References

Reserve Bank of India. (2022, June 21). 'Extension of timeline for implementation of certain provisions of Master Direction – Credit Card and Debit Card – Issuance and Conduct Directions, 2022'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12342&Mode=0

Reserve Bank of India. (2022, April 21). 'Master Direction – Credit Card and Debit Card – Issuance and Conduct Directions, 2022'. Retrieved from https://rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12300

Reserve Bank of India. (2024, March 07). 'Amendment to the Master Direction - Credit Card and Debit Card – Issuance and Conduct Directions, 2022'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12620&Mode=0


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