Banks and financial institutions have been warned by the RBI to strictly follow its fresh guidelines on credit cards. These guidelines have been issued for creating and maintaining charging interest rates and levying other fees on customers and any contravention can invite penal action.
An RBI circular said that all banks and financial institutions are advised to strictly adhere to the guidelines, both in letter and spirit.
Besides, complaints like charging annual fee on what were being offered as free cards, issuance of loans over phone, disputes over wrong billing, difficulty in accessing the credit card issuers and poor response from the call centres, it said.
Giving detailed guidelines for credit card operations, the RBI had earlier asked the banks to declare upfront the interest rate, various charges and the methodology of calculation of finance charges with illustrative examples.
As per an RBI circular issued in 2007, card companies should prescribe a ceiling rate of interest, including processing and other charges in case of small value personal loans and loans similar in nature.
There should be transparency in levying differential interest rates, it had said, adding, the banks should publicise through their website and other means, the interest rates charged to various categories of customers.
The circular also advised banks to indicate to the credit card holder upfront, the methodology of calculation of finance charges with illustrative examples, particularly in situations where only a part of the amount outstanding is paid by the customer.
These fresh directives have been issued by the RBI in response to numerous complaints by holders of credit cards, particularly with regard to excessive finance charges and issuance of unsolicited cards.
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