India’s banking regulator, RBI does not possess any details regarding the stiff fines and steep interest rates charged by banks on credit card defaults. When asked if RBI is aware of the fact that the banks are levying stiff fines along with heavy interest rate on credit card defaults and the statements are not sent purposely in order to earn unusual interest rates and fines on defaults, the bank said it was not in the know about these facts.
These questions were posed by RTI activist S C Agrawal, who also asked if RBI is aware that the banks levy overlimit charges in lieu of blocking payment by credit cards above their authorized limit. Again the bank replied in negative.
But RBI said that it had advised the banks vide a circular dated 7th May 2007 to put a highest ceiling rate of interest, inclusive of processing and other fees for small value personal loans and other equivalent loans. These instructions were also applicable to credit card outstandings too.
The bank further said that if the bank/NBFC levy interest rates that depend on the payment/default history of the card holder, there needs to be openness regarding charging this variable interest rates. Further it said that the bank must inform the cardholder regarding this high rate to the card holder.
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