24 April 2022

RBI’s master directions for credit, debit card issuance

Well, if you didn’t know, your credit card is a type of unsecured loan, which you take from your bank, and the Reserve Bank of India (RBI) has just issued master directions for credit as well as debit card issuance to give you some relief.

You use your credit card to buy goods, physically or virtually and withdraw cash. And, after a period — say within a month or two — you need to pay back the entire amount for your purchases. You can also opt to pay back in installments but that could be a costly affair.  

Coming back to the master directions, they will take effect from July 1, 2022.

RBI’s master directions for credit, debit card issuance
Shopping with credit cards.

Master directions for credit cards are given below:

The guidelines apply to banks but exclude payment banks, state co-op banks, and district central co-op banks. Even non-banking financial companies (NBFCs) have to follow the fresh norms of card issuance.

Now, scheduled commercial banks (SCBs) other than regional rural banks (RRBs) — having a net worth of at least Rs 100 crore — can now issue credit cards independently or through a pact with card-issuing banks or NBFCs.

But if these banks want to set up separate subsidiaries for credit card business, they need a green light from the apex bank.

Meanwhile, RRBs can issue credit cards in collaboration with their sponsor bank or other banks.

To issue credit cards, the issuers have to provide a one-page ‘Key Fact Statement’ along with the credit card application with details about the card. These include rate of interest and other charges, among others.

Moreover, the RBI — in its master directions — said card issuers may be allowed to introduce an insurance cover with the card to take care of the liabilities arising out of lost cards or card frauds, among others. This, we feel, is a big step in the right direction.

Companies or banks issuing cards, in tie-up with insurance companies, will have to obtain consent (in writing or digital mode) from the cardholders.

To ensure protection of the card, issuers have to seek one-time password (OTP)-based consent from cardholders for activating a credit card.

This is to be done if the card has not been activated by the customer for more than a month from the date of issuance.

If no consent is received on card activation, issuers will have to close the credit card account without any cost to the customer. This has to be done within seven working days from the date of seeking confirmation.

In case of a renewed or replaced card, the inactivated card can be closed subject to payment of all dues by the cardholder.

No card issuer can report credit information relating to a new credit card account to credit information companies prior to a card’s activation.

Among underwriting standards, card issuers will have to ensure complete transparency in conversion of credit card transactions into equated-monthly instalments (EMIs).

They have to clearly mention the principal, interest, and upfront discount provided by the card issuer (to make it no cost), before the conversion.

This will have to also be separately indicated in the credit card bill/statement.

EMI conversion with an interest component cannot be hidden as zero-interest or no-cost EMI.

These issuers have to ensure that loans offered through credit cards comply with the instructions on loans and advances issued by the RBI.

Further, the issuers will have to ensure credit limits on cards are not breached. This can be done by only seeking the cardholder’s permission.

Card issuers can issue credit cards to individuals for personal use along with add-on cards. These cards can also be linked to overdraft accounts.

Moreover, RBI said that add-on cards will come with liability only on the principal cardholder.

Also, business credit cards can be issued to business entities or individuals for business expenses.

While issuing corporate credit cards, the responsibilities and liabilities of the company and its employees need to be specified.

For closure of a credit card, a request will have to be honoured within seven working days by the card issuer. But this is subject to payment of all dues by the cardholder.

After a credit card is closed, the cardholder will have to be immediately notified about the closure through email or SMS. If not, there will be a penalty of Rs 500 per day for delay, payable to the customer, till the closure of the account. This is also a major step in the right direction.

Also, if a credit card has not been used for more than one year, closure of the card can be initiated after informing the cardholder.

If there is no reply from the cardholder within 30 days, the card account can be closed by the issuer, subject to payment of all dues by the cardholder.

According to the RBI, interest charged on credit cards will be based on the cost incurred and the extent of return reasonably expected by the card issuer.

The issuers will also prescribe an interest rate ceiling in line with other unsecured loans. These include processing and other charges on credit cards, in accordance with their Board’s policy.

If issuers charge interest rates that vary based on the payment or default history of the cardholder, there has to be transparency in levying such differential rates.

RBI also said card issuers will have to quote annualised percentage rates (APR) on credit cards for different situations such as retail purchases, balance transfer or cash advances, among others.

“The card issuers will specify, in the billing statement, the level of the unpaid amount of the bill,” the apex bank said.

Meanwhile, the RBI has asked issuers to make changes in charges with prospective effect only by giving prior notice of at least one month.

If a cardholder desires to surrender his card on account of any change in charges (higher charges), he can do so without any additional charge for closure.

According to the RBI, there will not be any hidden charges while issuing credit cards that are free of charge.

While recovering dues, card issuers will have to ensure that they, along with their agents, adhere to the instructions on Fair Practices Code for lenders, RBI said.

RBI strictly prohibited card issuers or their agents from resorting to intimidation or harassment for debt collection.

Some master directions for debit card issuance are:

Debit cards will be issued only to customers with savings or current accounts.

Banks cannot force a customer to avail debit card facility and can’t link debit card issuance to availing any other service of the bank.

A co-branded credit or debit card will indicate that it has been issued under a co-branding tie-up. The partner cannot advertise or market the co-branded card as its own product.

No bank can issue debit cards to loan account holders.

The RBI also asked card issuers to put in place a grievance redressal mechanism and publicise it.

RBI further said card issuers will have to ensure that their call centre staff members are trained adequately to tackle a complaint professionally.

For complaints not being redressed on time, the RBI said, “If a complainant does not get satisfactory response from the card issuer within a month from the date of lodging, a customer can approach the RBI Ombudsman for redressal of grievances.”


The RBI’s master directions for credit as well as debit card issuance could give a boost to card safety and pave the way for curbing harassment of customers by banks or agencies to a great extent.

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