The Reserve Bank of India (RBI) today directed credit card issuers to prescribe a ceiling rate of interest, including processing and other charges, in respect of small-value personal loans and loans similar in nature. These rates should apply to credit card dues also.
In case, banks / NBFCs charge interest rates, which vary on the basis of the payment or default history of the cardholder, there should be transparency in levying such differential interest rates, RBI said in a notification.
For this purpose, the banks should publicise through their website and other means, the interest rates charged to various categories of customers. Banks / NBFCs should upfront indicate to the credit card holder, the methodology of calculation of finance charges with illustrative examples, particularly in situations where a part of the amount outstanding is only paid by the customer.
Card issuers should also ensure that there is no delay in dispatching bills and that the customer gets at least one fortnight for making payment before the interest starts getting charged. Alternatively, they may also consider providing bills and statements of accounts online, with suitable inbuilt security. Also, they should consider putting in place a mechanism to ensure obtaining a receipt from the customer of the monthly statement.
Card issuers should quote annualised percentage rates (APR) on card products (separately for retail purchase and for cash advance, if different). The method of calculation of APR should be given with a couple of examples for better comprehension. The APR charged and the annual fee should be shown with equal prominence. The late payment charges, including the method of calculation of such charges and the number of days, should be prominently indicated.
The manner in which the outstanding unpaid amount will be included for calculation of interest should also be specifically shown with prominence in all monthly statements.