The banking regulator of the country, Reserve Bank of India, does not have any information about “heavy penalties” and “extra-ordinary interest rates” imposed by banks on credit card defaults. In reply to a question “Is RBI aware that banks are charging heavy penalties also in addition to extra-ordinary interest rate on credit card default payments? Statements are deliberately not mailed to earn abnormal interest rates and penalties on payment default” sent through RTI, the bank said it does not have any information.
“We do not have the information,” Thomas Mathew, Deputy General Manager, Reserve Bank of India, said in his reply.
RTI activist S C Agrawal also sought to know, “Is RBI aware that banks impose overlimit charges instead of blocking payment by credit cards beyond their sanctioned limit?” to which the RBI again said it did not have any information.
The RBI, however, said that banks have been advised through a circular dated May 7, 2007 to prescribe a maximum 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,” it said while replying on the steps taken by it to have uniform rules regarding penalties and interest rates in regard to credit cards issued by different banks.
The bank, quoting the circular, said, “In case, banks/Non Banking Finance Companies charge interest rates which vary based on the payment/default history of the card holder, there should be transparency in levying of such differential interest rates.”
The RBI said banks should inform the cardholder about the higher interest charged on account of payment or default history.
“For this purpose, the banks should publicise through their web site and other means, the interest rates charges to various categories of customers. Banks/NBFCs should upfront indicate to the credit card holder, the methodology of calculation of finance charges with illustrative examples,” the reply said.
The RBI, however, said as such the maximum interest rate to be charged by banks is left to the discretion of individual banks which is to be fixed with the prior approval of their respective Boards.