The Reserve Bank of India (RBI) has issued a cautionary circular to banks on credit cards rates to protect customers and stop defaults. RBI has also warned the banks that they themselves will be liable for misuse of unwanted cards.
RBI said banks must set ceiling for interest rates including processing fees though the central bank has not specified any limit.
The central bank stated that any bank or government body must inform about increasing or reducing interest rates.
As most customers are not aware or mislead into the method of calculation of charges RBI said there is a need for illustrative examples should be given to the cardholder to avoid any confusion on customer front.
RBI's issued cautionary circular on credit cards in view of a fear of rising defaults faced by banks. The easy availability of cards is coming back to trouble banks, as they are struggling to control losses and defaults. By issuing this circular, the RBI has tried to prevent this becoming a general issue.