RBI extends implementation of new credit card rules by three months

The Reserve Bank of India (RBI) on Tuesday extended the deadline by three months for financial institutions to implement certain elements of its master directions issued on April 21.

In a notification issued on Tuesday, RBI said that considering various representations received from the industry stakeholders, it has decided to extend the timeline for implementation of certain provisions of the Master Direction to October 01, 2022.

The RBI has extended the deadline for implementation of three directions – card issuers seeking OTP-based consent from customers for activating credit card, ensuring there is no breach in credit limit without explicit consent from the cardholder and no capitalization of unpaid charges.

As per the new directions, 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 seven working days from the date of seeking confirmation from the customer.

Card issuers shall also 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, the new directions said.

Considering various complaints from consumers, the RBI in April issued directions to scheduled banks and non-banking financial companies regarding the issuance of new credit and debit cards and billing.

As per the directions, telemarketers engaged by card-issuers must contact customers only between 10 am and 7 pm. The direction said, “Card issuers shall ensure complete transparency in the conversion of credit card transactions to Equated Monthly Instalments (EMIs) by clearly indicating the principal, interest and upfront discount provided by the merchant/card-issuer (to make it no cost), prior to the conversion. The same shall also be separately indicated in the credit card bill/statement. EMI conversion with interest component shall not be camouflaged as zero-interest/no-cost EMI.”

According to the new directions, a request for closure of cards must be honoured within seven working days subject to payment of all dues. Card issuers were also advised to initiate the process of closing a card if it has not been used for a year after intimating the customer in this regard.