Update: Reserve Bank of India’s (RBI) Master Directions on Issuance and Conduct of Credit and Debit Cards

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Update: Reserve Bank of India’s (RBI) Master Directions on Issuance and Conduct of Credit and Debit Cards

Apurva Singh

@apurvaa

April 25, 2022

Public Policy

247

The Reserve Bank of India (RBI) on April 21^st, 2022 issued the Master Directions on Issuance and Conduct of Credit and Debit Cards. These directions shall be effective from July 01, 2022. The directions related to credit cards apply to every scheduled bank (excluding payments banks, state cooperative banks and district central cooperative banks) and non-banking financial companies (NBFCs) operating in India. For debit cards, these directions shall be applicable to every bank operating in India.

Directions on Conduct of Credit Card Business

The Master Directions allow scheduled commercial banks (SCBs) other than regional rural banks (RRBs) whose net worth is INR 100 crore or above, to undertake credit card business. They also require NBFCs to take prior approval of RBI before undertaking credit card business, issuing credit or debit or charge cards or any other similar products.

The pre-requisite for this is a minimum net fund requirement of INR 100 crore.

It requires each card-issuer to have a documented board approved policy for the issuance and conduct of credit cards. Card issuers are also required to put in place a review mechanism for their credit card operations on a half-yearly basis by the Audit Committee of the Board of Directions.

Rights of consumer under the Master Directions

It also imposes obligations on card issuers to provide a key fact statement along with credit card application including rate of interest, quantum of charges etc, and that in case of rejection, reasons for rejection need to be specified. It also introduces an optional obligation on card issuers to provide insurance cover to customers to address the liabilities arising out of lost cards.

The issue of unsolicited cards or upgradation has been strictly prohibited. In case of issuance of an unsolicited card or upgradation without explicit consent, card issuers have been mandated to reverse the charges and pay penalty to the recipient amounting to twice the value of the charges reversed.

It also required card issuers to take one time password (OTP) based consent from the cardholders for activating a card. Interestingly, card issuers have also been required to ensure that the telemarketers they engage with, comply with Telecom Regulatory Authority of India (TRAI) directions on “Unsolicited Commercial Communications – National Customer Preference Register).”

It also mandates that unsolicited loans or other credit facilities shall not be offered to the credit cardholders without their explicit consent.

Directions on Conduct of Debit Card Business

It requires banks to have a comprehensive debit card issuance policy approved by their boards. Debit cards can only be issued to customers with saving bank/current accounts.

It also allows SCBs except RRBs to issue other form factors instead of a plastic debit card such as wearable after explicit consent of the customer.

Co-branding arrangement

The master directions define a co-branded card as a card that is issued jointly by a card-issuer and a co-branding entity bearing the names of the partnering entities. While prior approval of RBI is not required for issuance of co-branded debit cards or prepaid cards, urban cooperative cards (UCBs) are not allowed to issued debit or credit cards in tie-up with other non-bank entities.

The co-branded cards are required to indicate that the card has been issued under a co-branding arrangement. The co-branding partners are not allowed to advertise the co-branded card as their own product.

The role of co-branded entity has been restricted to marketing and distribution of the cards and providing access to the cardholder for the goods or services offered.

You can read the Master Directions here. For more information, kindly write to apurva@nasscom.in.

RBI

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Apurva Singh

Senior Policy Associate

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