The RBI today warned banks and financial institutions to strictly follow its guidelines on credit cards regarding transparency in charging interest rates and levying other fees on customers or face penal action.”All banks are once again advised to strictly adhere to the guidelines… both in letter and spirit,” an RBI circular said, adding that the violation would invite penal action.

The RBI has issued fresh directives in view of the numerous complaints from credit card holders, especially with regard to excessive finance charges and issuance of unsolicited cards, it said. Besides, complaints like charging annual fee on what were being offered as free cards, issuance of loans over phone, disputes over wrong billing, difficulty in accessing the credit card issuers and poor response from the call centres, it said.


RBI/2010-11/109, DBOD. FSD.BC.No. 25 /24.01.011/2010-11, July 9, 2010

All Scheduled Commercial Banks / NBFCs(excluding RRBs)

Credit Card Operations of Banks

As banks are aware, Reserve Bank of India has issued comprehensive guidelines on credit card operations of banks, from time to time. These guidelines are also compiled in the form of a Master Circular issued every year, the last being the circular DBOD.No.FSD.BC.16/24.01.011/2009-10 dated July 1, 2010.

The guidelines on credit card operations cover various aspects such as issue of credit cards, interest rates and other charges, wrongful billing, use of Direct Sales Agents (DSAs)/Direct Marketing Agents (DMAs) and other agents, protection of customer rights covering among other things right to privacy, customer confidentiality and fair practices in debt collection, redressal of customer grievances, internal control and monitoring systems, fraud control etc. Banks have been advised as part of the said guidelines that Reserve Bank of India reserves the right to impose penalty on a bank/NBFC under the provisions of the Banking Regulation Act, 1949/the Reserve Bank of India Act, 1934, respectively for violation of any of these guidelines.

2. Banks have also been advised vide our circular no. DBOD.No.Dir.BC.93/13.03.00/2006-07 dated May 7, 2007 that they should prescribe a ceiling rate of interest, including processing and other charges in respect of small value personal loans and loans similar in nature. The above instructions are applicable to credit card dues also. In case, banks / NBFCs charge interest rates which vary based on the payment / default history of the cardholder, there should be transparency in levying of such differential interest rates. In other words, the fact that higher interest rates are being charged to the cardholder on account of his payment / default history should be made known to the cardholder. For this purpose, the banks should publicise through their website and other means, the interest rates charged to various categories of customers. Banks / NBFCs have also been advised that they should indicate to the credit card holder upfront, the methodology of calculation of finance charges with illustrative examples, particularly in situations where only a part of the amount outstanding is paid by the customer.

3. Despite the issue of comprehensive instructions as above to banks, it is observed that Reserve Bank of India and the Offices of the Banking Ombudsmen, continue to receive numerous complaints from credit card holders regarding the credit card operations of the banks, especially with regard to excessive finance charges, issuance of unsolicited credit cards, unsolicited insurance policies and recovery of premium charges, charging of annual fee in spite of being offered as ‘free’ cards, issuance of loans over phone, disputes over wrong billing, settlement offers conveyed telephonically, non-settlement of insurance claims after the demise of the card holder, offensive calls, difficulty in accessing the credit card issuers and the poor response from the call centres etc.

4. All banks are, therefore, once again advised to strictly adhere to the guidelines contained in the Master Circular on Credit Card Operations, both in letter and spirit, failing which Reserve Bank of India shall be constrained to initiate suitable penal action, including levy of monetary penalties, under the relevant statutory provisions.

Yours faithfully,

(A.K. Khound)
Chief General Manager

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  1. ChandraMouliswar Ghatty says:

    I am a ABN-AMRO (now changed to Royal Bank of Scotland)card holder since two and half years Most the WORST and adament attitude of the Babks is that they will not give any reply to our doubts. If we question them they start making threatening calls from their head office at Bombay or Delhi and from local Branches. I was admitted to the card member on 14/8/2006. The membership fee service tax and cess on it was debited to my account even without my knowledge. Before this date i.e.on 24-7-2006 Rs.27,259/-was debited to my Account as balance transfer along with service tax and cess. Actually on that date I have no Credit card other then this bank. I was reminding repeatedly but there was no response from any corner. The Customer care center has no powers to do or to take any action except repeat what is there in the card Account.The Recovery agents are there to collect the amouint without heading to our representations. I request the RBI to issue specific directions regarding hier rates of interest charged by them. 3.5% PM is too high and they are charging on daily balance and will be added to the principal for next day and again calculate interest on that also. It is nothing but clear fraud on the Customers.It is better to fight collectively forming State -wise Consumers Forum and representing to Banking Ombudsmen or to fight legally. Some body must take initiative.

  2. CA Sanjay Kumar says:

    In India , the credit card business has older, more than 10 years ,in spite of that ,the reliability standard to charging of interest and other facilitation charges in compare with other banking business is very low in the eye of consumers/card holders.

    Since it is need of hour .So RBI should pay its special attention in this regard to consolidate and place the reliability of public/card holder.

    The followings is the suggestions in this regards –

    To standarsided the process and quantum of interest rate to be charged (like based on newly desived system of “BASE RATE”) in case of payment made beyond by due date and in case of one time settlement.In addition to interest rate ,the charges should also standarised.

    2.RBI should direct to open common Awareness cum facilitation centre (like Sharing ATM SYSTEM) to-

    “Cousell,guide and advise -how the credit cards should be used smartly & deligently.” That may be with or without cost.

    This facilitation centre can also be used for other purposes.

    3.In case of New card – mandatorily imposition of pre-activation clause/conditions.

    Pre-activation clause/conditions-

    Every new cardholders would approch to nearby facilitation centre, after receiving the cards, to take counsell & guide.

    After getting its clearance from such centre, the Banks would arrange to activate such cards and now onwards it can be ready to use.

    Note- The above referred suggestions is personal.

  3. Dinesh says:

    It is very good that RBI is looking after the credit card transaction / charges / term and condition but Banks are charging very high interest @ 3.50% PM. So, RBI should do in this matter.

  4. Rama Krushna Sahu says:

    I am also facing the same problem with HDFC Bank. Certain amount was due from my credit card due to some miss understanding, now the amont is so high which is not possible for me to pay. The collection guies harassing me a lot. Several times I have approched for one time settlement but the amount they are charging is also very high. Pls. help out in this regards.

    Thanking You,
    Yours’ faithfully,

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