RBI issues new rules for credit, debit cards meant for business accounts

The Reserve Bank of India (RBI) on Thursday tweaked the rules for credit and debit cards used for business accounts. Under the new rules, the central bank asked business card issuers to put in place an effective mechanism to monitor the end use of funds. The new provisions will come into effect immediately, the RBI said.

In February, the RBI had ordered Visa to stop using an unauthorised route to make business-to-business card payments, which used fintech companies as an intermediary.
 
The regulator said that card-issuers cannot share data of customers with outsourcing partners, unless it is "essential to discharge the functions" of the outsourcing partners.

The RBI said if data needs to be shared, explicit consent from the cardholder will need to be obtained. It added the storage and ownership of card data should remain with the card-issuer.

"In exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949 and Chapter IIIB of the Reserve Bank of India Act, 1934, the Reserve Bank of India being satisfied that it is necessary and expedient in the public interest to do so, hereby, amends certain provisions issued vide Master Direction DoR.AUT.REC.No.27/24.01.041/2022-23 dated April 21, 2022 on ‘Credit Card and Debit Card – Issuance and Conduct Directions, 2022’," the RBI said. 

“The information displayed through the CBP’s platform shall be visible only to the cardholder and shall neither be accessed nor be stored by the CBP,” the RBI said.

The RBI said that for the purpose of cardholder’s convenience, card transaction-related data may be drawn directly from the card issuer’s system in an encrypted form and displayed in the co-branding partner (CBP) platform with robust security.

RBI FAQs on Credit Card and Debit Card 

> In case a cardholder makes partial payment, can a card-issuer charge interest/levy late payment charges on the total amount due?

In case a cardholder does not clear the total amount due within the payment due date, interest free credit period will be lost, and interest may be levied from the date of transaction on the outstanding amount (adjusted for payments/refunds/reversed transactions as and when credited) and not on the total amount due. 

Further, late payment fee and other charges relating to delay in payment shall be levied only on the outstanding amount (adjusted for payments/refunds/reversed transactions as and when credited) after the payment due date and not on the total amount due.

> Can a credit card-issuer levy interest on the unpaid taxes/levies/charges?

No, card-issuers shall not capitalize i.e., levy interest or any other charges, on the unpaid taxes/levies/charges. As the provision contained under para 9(b)(ii) of the MD became effective from October 01, 2022, card-issuers shall not capitalize unpaid taxes/levies/charges that have been billed from October 01, 2022.

> What should a customer do if a credit card is issued without his/her consent (unsolicited card)?

Card issuers are prohibited from issuing unsolicited credit cards and are required to seek prior and explicit consent from the customer before issuing a card. However, if the customer receives an unsolicited card, he/she should refrain from activating or providing consent for activation of card through OTP or any other means. 

If no consent is received for activating the card, the card-issuer is required to close the credit card account without any cost to the customer within seven working days from the date of seeking confirmation from the customer and shall also intimate the customer that the credit card account has been closed. 

> Can a card be issued to other loan accounts such as overdraft facility, cash credit facility, working capital loan?

Yes, paragraphs 7(b) and 7(c) of the MD have enabled issuance of various types of credit cards which can be customised to access the limits available in different loan accounts, duly aligned to the terms and conditions stipulated for the concerned loan account. 

For example, a customer availing an overdraft facility from a bank can be issued a type of credit card to access the funds available under the facility. The terms of usage of this credit card (interest charged, repayment schedule, penalty, cash withdrawal limit etc.,) shall correspond to the terms and conditions applicable to the overdraft facility.

> Whether consent for activation and closure of a business credit card can be obtained from the corporate/business entity instead of the cardholder?

For business credit cards, wherein the cards have been issued based on the application by a corporate or business entity, card-issuers shall seek explicit consent as required under paragraph 6(a)(vi)/send intimation as required under paragraph 8(b) respectively from/to the principal account holder (viz. corporate or business entity) unless specified otherwise in the agreement. 

Similarly, with regard to retail credit cards too, it is clarified that the requisite consent shall be sought from the principal cardholder and not from the add-on cardholders.

However, for blocking of such credit cards, either the actual cardholder or the principal cardholder can initiate the request.

On Wednesday, the RBI said from 6 September, both banks and non-banking financial institutions issuing credit cards must offer customers the option to select from multiple card networks -- RuPay, Amex, Mastercard, or Visa -- at the time of issuance or renewal.

As per the new rules, the existing cardholders can switch to new networks during the renewal process. However, these regulations only apply to credit card issuers with more than 10 lakh cards as of now. 

The RBI specified that card issuers are not allowed to enter into any agreements with card networks that restrict them from accessing services offered by other card networks.