Non-banking financial companies (NBFCs) will need prior approval from the Reserve Bank of India (RBI) to issue credit cards, the banking regulator said, reported Business Standard.
Apart from the requirement of certificate of registration, a net-owned fund of ₹100 crore has been made a prerequisite for entering the credit card business for any finance company, including a non-deposit taking one.
“Without obtaining prior approval from the RBI, NBFCs shall not issue debit cards, credit cards, charge cards, or similar products virtually or physically,” the RBI said while updating the master direction on credit and debit cards.
The RBI has also said regional rural banks can issue credit cards in collaboration with their sponsor banks or other banks, wrote Business Standard.
Further, financially sound and well-managed scheduled urban cooperative banks (UCBs) with a minimum net worth of ₹100 crore which are core banking system enabled (CBS) can issue credit cards, subject to some conditions.
To increase transparency related to interest rate charged by credit card issuers, the 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.
No unsolicited loans
The RBI bank has told 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 also 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.
Their agents have also to refrain from actions that could damage their integrity and reputation, the RBI said.