Updated by RBI as on April 2022
CONDUCT OF CREDIT CARD BUSINESS:
(a) Scheduled Commercial Banks (SCBs) with a net worth of ?100 crore and above can engage in credit card business independently or in tie-up with other banks/NBFCs, subject to Board approval. Separate subsidiaries for credit card business require prior RBI approval.
(b) Regional Rural Banks (RRBs) can issue credit cards in collaboration with their sponsor bank or other banks.
(c) Scheduled Urban Cooperative Banks (UCBs) with a net worth of ?100 crore or more and CBS enabled may issue credit cards with specific conditions. Limits are regulated based on circulars, and total unsecured loans, including credit card limits, should not exceed 10% of total assets.
(d) Non-Banking Financial Companies (NBFCs) need RBI approval to undertake credit card business. A Certificate of Registration and a minimum net owned fund of ?100 crore are required. NBFCs are prohibited from issuing debit cards, credit cards, or similar products without prior RBI approval. Governance Framework:
- Card-issuers must maintain a Board-approved policy for credit card issuance in line with RBI guidelines.
- This policy should be accessible on their website.
- Additionally, a semi-annual review of credit card operations, covering customer service, fraud prevention, complaint handling, card usage analysis, and associated risks, must be conducted by the Audit Committee of the Board.
- Card-issuers must provide a one-page Key Fact Statemen. Rejected applications require a written explanation.
- The Most Important Terms and Conditions (MITC) must be highlighted, published, and sent separately to customers at the acceptance stage. MITC changes should be communicated to customers. Insurance cover for card liabilities may be offered with explicit written or digital consent.
- Unsolicited cards/upgrades are prohibited. Charges for such instances must be reversed, and a penalty paid to the recipient. Misuse of unsolicited cards is the responsibility of the card-issuer
- OTP-based consent is required for activating a credit card not activated within 30 days. Inactive cards may be closed if no consent is received, subject to payment of dues for renewed or replaced cards.
- Reporting credit information to Credit Information Companies before card activation is prohibited.?
- Explicit written or digital consent is required before issuing a credit card. Telemarketers must comply with TRAI regulations, contacting customers only between 10:00 hrs and 19:00 hrs.
- The decision-making power for issuing credit cards rests with the card-issuer, with agents limited to soliciting/servicing customers/accounts.
- Credit limits should be determined by considering limits from other entities based on self-declaration/credit information, following the card-issuer's board-approved policy.
- Transparency is essential in converting credit card transactions to EMIs, with clear indication of principal, interest, and upfront discounts. Misrepresentation of interest as zero-interest/no-cost EMI is prohibited.
- Card-issuers must not breach sanctioned credit limits without explicit consent from the cardholder.
- Credit card-issuers must honor closure requests within 7 working days, provided all dues are paid.?
- The cardholder should be promptly notified through email, SMS, etc.?
- Multiple channels for closure requests, such as helpline, email, IVR, website link, internet banking, or mobile app, should be provided.?
- Delays beyond 7 working days will incur a penalty of ?500 per day until closure, excluding outstanding dues.
- If a credit card is unused for over a year, the card-issuer shall initiate closure after notifying the cardholder. If there is no response within 30 days, the card account will be closed, subject to payment of all dues.?
- Information about the closure will be updated with Credit Information Companies within 30 days.
- After closing a credit card account, any credit balance will be transferred to the cardholder's bank account. Card-issuers must obtain the cardholder's bank account details if not already available.
Interest rates and other charges:?
- Card-issuers must follow RBI instructions, ensuring justifiable interest rates, setting a ceiling aligned with unsecured loans, and maintaining transparency.
- Interest rates and rationale should be auditable and publicized.
- Ensuring no hidden charges for issuing free credit cards.
- Card-issuers must promptly send bills, providing at least one fortnight for payment. Bills may be delivered through internet/mobile banking with cardholder consent.
- No charges on transactions disputed as 'fraud' until resolution.
- Cardholders can modify the credit card billing cycle once for flexibility.
- Credit amounts from refund/failed/reversed transactions before the due date shall be immediately adjusted against the 'payment due' and notified.
- Card-issuers must reverse the credit amount to the cardholder's bank account within three working days if requested.
Reporting to Credit Information Companies:
- When providing credit history information to a registered Credit Information Company, the card-issuer must inform the customer explicitly in accordance with the Credit Information Companies (Regulation) Act, 2005.
- Before reporting default status, card-issuers must follow a board-approved procedure, including a seven-day notice to the cardholder. If the customer settles dues after being reported as a defaulter, the status must be updated within 30 days.?
- Adhere to Fair Practices Code instructions for dues recovery.
- When appointing third-party debt collection agencies, ensure integrity, confidentiality, and provide clear contact details. Promptly share recovery agent details with the cardholder.
- Prohibit intimidation or harassment in debt collection, following RBI's guidelines on engagement with recovery agents.
- Limit customer information disclosure to what's necessary for recovery.?
ISSUE OF DEBIT CARD BY BANKS:
- Banks must create a comprehensive debit card issuance policy approved by their Boards, without requiring prior approval from the Reserve Bank.
- Debit cards are restricted to customers with Savings Bank/Current Accounts.
- Debit cards should not be issued to cash credit/loan account holders. However, overdraft facilities linked to Pradhan Mantri Jan Dhan Yojana accounts can be associated with a debit card.
- Banks must not compel customers to use debit cards and should not link debit card issuance to the utilization of other bank facilities.
- Banks can issue alternative form factors like wearables with customer consent.
- Banks must offer options for disabling or blocking the form factor through various channels.
CO-BRANDING ARRANGEMENT Issue of Co-branded Cards:
- Banks and card-issuers can issue co-branded debit and prepaid cards without prior approval from the Reserve Bank, subject to specified conditions.?
- Urban Cooperative Banks (UCBs) are restricted from issuing debit/credit cards in tie-ups with non-bank entities.
- Co-branded credit/debit cards must explicitly indicate their co-branded nature.
- The co-branding partner should not market the card as its own, and all marketing materials must prominently display the name of the card-issuer.
- The co-branded card must prominently display the branding of the card-issuer.
- Co-branding arrangements must align with the card-issuer's Board approved policy.
- The policy should address risks, including reputation risk, and incorporate risk mitigation measures.
- Revenue sharing details between the card-issuer and co-branding partner must be disclosed to cardholders and displayed on the issuer's website.
- Card-issuers must conduct due diligence on co-branding partners to mitigate reputation risks.
- If the co-branding partner is a financial entity, it must have necessary regulator approvals
Outsourcing of Activities:
- Card-issuers are responsible for the actions of co-branding partners.
- Adherence to guidelines on outsourcing financial services is mandatory.
- Timely delivery of cash backs, discounts, and offers by co-branding partners is the card-issuer's responsibility.
Co-branding Partner Roles:
- Co-branding partners are limited to marketing/distribution of cards and providing access to goods/services.
- Co-branding partners should not access transaction information. After card issuance, they are not involved in card-related processes, except for initial grievance contact.
GENERAL GUIDELINES FOR CREDIT AND DEBIT CARDS
- Card-issuers must maintain internal records to trace operations and rectify errors, following 'Master Direction on Know Your Customer.'
- Provide the cardholder with an immediate record of transactions, such as a receipt, bank statement, email, or SMS.
- Immediately block a lost card upon cardholder notification; formalities can follow within a defined period per Board approved policy.
- Only dispatch a card unsolicited if it replaces/renews an existing card; replacement for a blocked card requires explicit consent.
- Provide discounts, cashbacks, rewards transparently; accounting must be verifiable. Display benefit details on the website and provide a copy to the cardholder.
- For cards with insurance, ensure nomination details are recorded, include insurance information in statements, and provide Insurance Company contact details.
Terms and Conditions for Card Issuance:
- The card-issuer and cardholder relationship is contractual, with terms provided in clear and fair language.
- Card-issuers can't levy undisclosed charges without explicit consent. All charges must be displayed on the issuer's website.
- Clearly indicate any convenience fee before specific transactions.
- Card-issuers can alter terms but must give a 30-day notice. Cardholders are deemed to accept changes if they don't withdraw within this period.
- Cardholders are obliged to keep their cards safe and not record PINs in accessible forms.
- Emphasize the issuer's responsibility to handle PINs with care and not disclose them to anyone other than the cardholder.
?Redressal of card grievances:
- Card-issuers must establish a Grievance Redressal Mechanism, publicized through media. Information about the designated grievance redressal officer, including contact details, must be on credit card bills.?
- Grievances should be promptly addressed, with specific timelines outlined in the Board approved policy, and procedures made available on the website.
- Card-issuers are responsible for compensating complainants for time, expenses, financial loss, and mental anguish due to issuer faults. If the grievance isn't resolved satisfactorily within a month, the complainant can approach the RBI Ombudsman for redressal.
Customer Information Confidentiality:
- Card-issuers must not disclose customer information without explicit consent, adhering to data protection laws. Any customer consent for information sharing should be clearly explained, with card-issuers taking sole responsibility for data accuracy.
- In co-branding arrangements, the co-branding entity should not access customer account details in violation of secrecy obligations.
Card-issuers with past approvals for co-branded debit cards should ensure conformity with guidelines in Chapter IV. If the co-branding involves two banks, the card-issuing bank must comply with relevant instructions.
Detailed circular is attached here:
Quality Assurance Project Manager at IBM
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