RBI Need Approval from RBI for Issuing Cards

BANKING AND ECONOMY

To issue credit cards, the Non-Banking Finance Companies (NBFC) need approval from the Reserve Bank of India (RBI). For approval, the NBFCs will need a certificate of registration. Without approval from the bank’s regulator, NBFCs shall not issue debit cards, credit cards, charge cards, or similar products virtually or physically.

As per the RBI rules, to enter into the credit card business, the finance companies should have a Net-owned fund of Rs.100 crore, including a non-deposit taking one.

The RBI gave permission to the following banks to issue credit cards;

  • The scheduled urban cooperative banks (UCBs) with a minimum net worth of Rs 100 crore which are core banking system enabled (CBS) enabled can issue credit cards, subject to some conditions.
  • The Regional Rural Banks (RRB) can issue credit cards in collaboration with their sponsor bank or other banks.

RBI has asked the credit card issuers to quote the Annualized Percentage Rates (APR) on credit cards to increase transparency related to the interest rate charged on the cards. The method of calculation of APR also has to be given with clear examples for better comprehension.

Without the consent of the RBI, the finance entities should not offer unsolicited loans or other credit facilities to the credit cardholders. Without the consent of the customer, the card issuers should not unilaterally upgrade credit cards and enhance credit limits, without the explicit consent of the cardholder.

If any third parties collect the debts on behalf of the card issuers, the card issuers have to be mindful that agents should not resort to intimidation or harassment of any kind.

   Important points for the exam:

  • The Non-Banking Finance Companies (NBFC) should get approval from the Reserve Bank of India for issuing credit cards to its customers.
  • Without approval from the bank’s regulator, NBFCs shall not issue debit cards, credit cards, charge cards, or similar products virtually or physically.
  • The finance companies should have a Net-owned fund of Rs.100 crore.
  • The Annualized Percentage Rates (APR) on credit cards and its calculation method should be quoted with the RBI to increase the transparency related to the interest rate charged on the cards.

   Facts to know:

  • A Non-Banking Financial Company (NBFC) registered under the Companies Act, 1956.
  • NBFCs are regulated by the RBI.
  • Governor of RBI: Shri Shaktikanta Das.
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