RBI asks banks to reform the credit card industry

The reckless and irresponsible way in which the banks and credit card issuers in India have been behaving has prompted the Reserve Bank of India (RBI) to introduce some remedial measures as listed below.

(1) Issuing unsolicited cards: As a rule no body who does not seek one should be given a card. In case such cards are issued, activated and billed without the customer’s consent, banks should not only reverse the entries but pay a fine amounting to twice the value of such outstanding.

(2) There have been instances of new cards being intercepted and misused by unscrupulous elements before they reach customers. The issuing banks will be responsible for such monetary loss. As a rule there should be safeguards against misuse. The RBI suggests one or other of fraud-minimising devices such as photo identity cards, embossing a PIN and signature lamination.

(3) Wherever cards have been packaged with an insurance element — commonly accident insurance — details such as the nature and extent of insurance, other conditions if any, should be explicitly stated. Also, the person in the insurance company who can be contacted by the customer should be mentioned.

(4) Reasons for rejecting a card application should be communicated to the applicants.

(5) Banks should get explicit permission from customers for sharing information about them.

(6) Customer education should receive top priority and cover the entire gamut of credit card operations. Illustrative examples should be used. Call centre employees should be suitably trained.

(7) Closure and blocking of lost cards should be given top priority.

CRR rate further slashed by 100 bps

Adressing an urgent need for more liqudity, the Reserve Bank of India (RBI) has slashed the cash reserve ratio (CRR) by another 100 basis points. This will inject about Rs 60,000 crore into the cash-strapped system, the Reserve Bank on Friday announced additional one per cent cut in mandatory requirements for banks to keep cash with the central bank over and above 0.50 per cent reduction announced earlier.

With this, a total 1.50 per cent cut in Cash Reserve Ratio (CRR) to 7.50 per cent will come into effect from tomorrow.

“Accordingly, on a review of the evolving liquidity situation in the context of global and domestic developments it has been decided to reduce CRR by 150 basis points to 7.50 per cent with effect from the fortnight beginning October 11, 2008 instead of 50 basis points reduction announced on October 6, 2008,” RBI said in a statement here.