Updates to RBI Master Direction on Credit and Debit Card Issuance and Conduct

Posted On - 4 April, 2024 • By - Aditi Motwani

The RBI on 7th March 2024 vide its Master Circular has brought certain amendments to the Master Direction on the Credit and Debit card – Issuance and Conduct Directions, 2022. The amendments introduced aim to enhance efficiency, transparency, and consumer protection measures in the credit and debit card ecosystem. Here is a brief overview of the key changes:

1. Business Credit Cards Oversight: Card-issuers are now mandated to establish effective mechanisms to monitor the end-use of funds for business credit cards. This ensures accountability and responsible lending practices.

2. Penalty for Delay in Account Closure: In case of delays in closing credit card accounts, card-issuers will now face penalties of ₹500 per calendar day instead of working days, providing a more stringent deterrent against procrastination.

3. Clarity on Minimum Payment Implications: Card-issuers are required to prominently display warnings about the consequences of paying only the minimum amount due, emphasizing the potential long-term financial burden on cardholders.

4. Billing Cycle Modification: Cardholders are granted the flexibility to modify their credit card billing cycles at least once, catering to their individual preferences and financial management needs.

5. Enhanced Data Protection Measures: Stringent guidelines are introduced to safeguard customer data, ensuring explicit consent before sharing information with third parties and compliance with data protection laws.

6. Introduction of New Provisions: Several new provisions have been added, including defining “Total Amount Due,” specifying interest computation methods, providing authorized payment modes, and standardizing procedures for blocking or suspending cards.

7. Repeal of Earlier Circulars: Certain earlier circulars and paragraphs related to co-branded credit card businesses have been repealed to streamline regulations and avoid redundancy.

These amendments underscore the RBI’s commitment to fostering a robust and consumer-friendly credit and debit card ecosystem. By promoting responsible lending practices, enhancing transparency, and strengthening consumer protection measures, these changes aim to build trust and confidence among stakeholders.

In addition to the amendments highlighted above, the RBI’s revised Master Direction also introduces measures to address emerging trends and technological advancements in the payment industry. One notable inclusion is the provision allowing banks to issue alternative form factors, such as wearables, in place of or in addition to traditional plastic debit or credit cards. This move reflects the evolving preferences of consumers towards convenient and secure payment methods, while ensuring that such alternatives adhere to the same regulatory standards and guidelines applicable to conventional cards.

Furthermore, the updated guidelines emphasize the importance of co-branding partnerships in the credit and debit card space. While facilitating collaborations between banks and other entities for co-branded cards, the RBI underscores the need for transparency and adherence to regulatory requirements. The guidelines clarify the roles and responsibilities of co-branding partners, ensuring that consumers are adequately informed about the nature of such arrangements and protected from potential misuse or misrepresentation.

Lastly, the revised Master Direction reinforces the RBI’s commitment to promoting fair and efficient grievance redressal mechanisms within the credit and debit card ecosystem. By holding card-issuers accountable for timely resolution of customer complaints and providing avenues for escalation through the RBI Ombudsman under the Integrated Ombudsman Scheme, the regulator aims to instill confidence among cardholders and maintain the integrity of the financial system. These measures underscore the RBI’s proactive approach towards safeguarding consumer interests and fostering trust in India’s banking and financial sector.