Credit, debit card issuance: RBI extends timeline for implementation of certain provisions

The Reserve Bank of India (RBI) on Tuesday extended the timeline for the implementation of certain provisions of its master direction with regard to the issuance and conduct of credit cards and debit cards. These directions were issued on April 21, 2022. The timeline has been extended from July 1, 2022, to October 1, 2022, the central bank says in its latest notification.

"Considering various representations received from the industry stakeholders, it has been decided to extend the timeline for implementation of the following provisions of the Master Direction to October 01, 2022," says the RBI.

As per the provisions that will be implemented under the new directives, card-issuers will 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 seven working days from the date of seeking confirmation from the customer," says the RBI.

The central bank adds "card-issuers must ensure 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".

Further, there will be no capitalisation of unpaid charges or levies or taxes for charging or compounding of interest.

The RBI says the stipulated timeline for implementation of the rest of the provisions of the master direction remains unchanged i.e. July 1, 2022.

In its master directions issued to banks and non-banking financial companies, the RBI issued certain directions in the wake of heightened cyber security risks. The central bank said NBFCs can't undertake credit card business without its prior approval. It said if any company wants to engage in this activity, it'll require a certificate of registration, apart from specific permission to enter into this business. The pre-requisite for this is a minimum net owned fund of ₹100 crore, the RBI said.

"Without obtaining prior approval from the Reserve Bank, NBFCs shall not issue debit cards, credit cards, charge cards, or similar products virtually or physically," says the RBI directive.

The RBI said scheduled commercial banks, other than regional rural banks, with a net worth of ₹100 crore and above, can do credit card business either independently or in tie-up arrangement with other card-issuing banks or NBFCs with their board approvals. The RBI said SCBs, excluding small finance banks and regional rural banks, who want to set up separate subsidiaries for credit card business will also need the RBI nod.

On regional rural banks, the RBI says they can issue credit cards but with their sponsor bank or other banks. The "financially sound and well managed" CBS-enabled scheduled urban cooperative banks, with a minimum of ₹100 crore net worth, can also issue credit cards under certain conditions.

The RBI says banks will formulate a comprehensive debit cards issuance policy, with its board approval.

Prior approval from the RBI is not necessary for banks to issue debit cards. Debit cards will only be issued to customers having savings bank/current accounts. These cards can't be issued to cash credit or loan account holders, it adds. However, banks can link the overdraft facility provided along with Pradhan Mantri Jan Dhan Yojana accounts with a debit card. "Banks also can't force a customer to avail debit card facility and will not link it with availing of any other facility offered by it," the guidelines say.

The central bank said for instructions on the interest rate, card issuers will be guided by the RBI from time to time. "Interest charged on credit cards shall be justifiable having regard to the cost incurred and the extent of return that could be reasonably expected by the card-issuer," the RBI says. It also directed card issuers to honour closure requests in seven working days or pay ₹500 per day to customers for the delay. "Any request for closure of a credit card shall be honoured within seven working days by the credit card issuer, subject to payment of all dues by the cardholder. Subsequent to the closure of credit card, the cardholder shall be immediately notified about the closure through email, SMS, etc," the banking regulator says.