RBI says non-banks need approval to issue credit cards, lists more rules

Non-banking finance companies (NBFC) will need approval from the Reserve Bank of India (RBI) to issue credit cards, said the regulator said on Thursday.

Companies will need a certificate of registration. Net-owned fund of Rs 100 crore will be a prerequisite for entering the credit card business for any finance company, including a non-deposit taking one.

“Without obtaining prior approval from the Reserve Bank, NBFCs shall not issue debit cards, credit cards, charge cards, or similar products virtually or physically,” RBI said while updating the master direction on credit and debit cards.

The RBI said that regional rural banks can issue credit cards in collaboration with their sponsor bank or other banks. Further, financially sound and well managed scheduled urban cooperative Banks (UCBs) with minimum net worth of Rs 100 crore which are core banking system enabled (CBS) enabled can issue credit cards, subject to some conditions.

To increase transparency related to interest rate charged by the credit card issuers, RBI has asked them to quote the annualised percentage rates (APR) on credit cards for different situations such as retail purchases, balance transfer, cash advances, non-payment of minimum amount due, late payment etc., if different. The method of calculation of APR also has to be given with clear examples for better comprehension, the central bank said.

The central bank has asked finance entities to not offer unsolicited loans or other credit facilities to the credit cardholders, without seeking explicit consent. In case an unsolicited credit facility is extended without the written/explicit consent of the cardholder and the latter objects to the same, the card issuer has to not only withdraw the facility, but will also be liable to pay a penalty decided by the RBI ombudsman.

Card issuers have been asked to not unilaterally upgrade credit cards and enhance credit limits, without explicit consent of the cardholder.

When it comes to debt collection by third party agencies, card issuers have to be mindful that agents should not resort to intimidation or harassment of any kind. Also, their agents have to refrain from actions that could damage their integrity and reputation, the RBI said.