Explained: How RBI's new credit and debit card rules will help customers
The Reserve Bank of India's credit card and debit card circular covers a lot of ground to protect customers and improve their user experience. Here is how closure of cards and intimation by banks change.
The Reserve Bank of India (RBI) has put out a master circular covering issuing of credit and debit cards by banks, NBFCs and fintechs. This circular covers a lot of ground to protect customers and this will mean new processes for the banks.
How are customers benefiting?
Once the rules come into play, a customer's consent is needed to continue with a new card if the customer doesn’t use it within 30 days.
If no response comes from the customer, then the card will be considered closed on the 37th day after it has arrived.
Many credit card customers struggle to close their cards and this will be beneficial for them.
More work for banks
For banks, it is very expensive to acquire a customer and often 20 percent of the cards actually get activated from the 30th to the 90th day. So, it looks like a large part of new customers will not get activated at all going by the new rules, that's a cost to banks and to the co-branded entities.
Fees and charges:
As soon as a customer is acquired, a concise one-pager of all the fees and charges should be provided, says the new rule. This should especially be on revolving interest rates and there has to be a defined limit and the basis of calculation has to be told to the customer.
The bankers are still not clear whether this means a change of methodology of revolving credit.
Card Closures:
The customer can close a card within 30 days, when a bank announces new rules and revises the rules. and give an option to get out.
If a card is inactive for one year, it can be closed but only after notice to the customers. Plus, the bank can't take more than seven days to close a card.
Watch the accompanying video of CNBC-TV18’s Latha Venkatesh for more
(Edited by : Abhishek Jha)
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