Changes to the OTP rule for credit cards have now been postponed to October 1
NEW DELHI: Adhering to demands from industry players, the Reserve Bank on Tuesday gave banks and non-bank financial companies issuing credit and debit cards an additional three months to comply with certain standards, including the activation of cards without customer consent.
Earlier banks and NBFCs had to implement the main direction on ‘Credit card and debit card – Issuance and Conduct Directions, 2022′ from 1 July. The Indian Banks’ Association (IBA) had requested a six-month extension of the Master Directions changes for the cards, but the RBI said that in view of the association’s requests, the implementation of the provisions has been extended for three months.
The extension was granted for the provision that required banks or card-issuing institutions to search for a one-time password (OTPs) on the basis of the consent of the cardholder for the activation of a credit card if it has not been activated by the customer himself for more than 30 days from the date of issue .
If no consent is received for card activation, card issuers shall close the credit card account at no cost to the customer within seven business days from the date of the customer’s confirmation request.
In addition, card issuers have been instructed to ensure that the credit limit as sanctioned and notified to the cardholder is not exceeded at any time without seeking the cardholder’s explicit consent before the 1st July. Also in this case they have now had time until October 1st.
The RBI has also postponed the implementation of a standard on unpaid fees and compound interest for three months. In accordance with the general instructions, there should be no capitalization of unpaid fees/levies/taxes for invoicing/interest compounding.
However, the planned July 1 deadline for the implementation of the rest of the provisions such as those related to co-branding, which limit the role of co-branding entities to the marketing and distribution of credit or prepaid cards, remains the same. Additionally, the issuance of unsolicited cards/upgrades without the express consent of the recipient is strictly prohibited. If the cardholder is charged for the same thing, the card issuer must not only reverse the charge immediately, but also pay a penalty of twice the value of the charge waived. In addition, the person in whose name the card is issued may also apply to the RBI Ombudsman who will determine the amount of compensation payable by the card issuer to the recipient of the unsolicited card.
“There have been instances where unsolicited/requested cards have been misused before reaching the persons in whose name they were issued. It is emphasized that any loss resulting from the misuse of such unsolicited cards Solicited will be the responsibility of the card issuer only and the person in whose name the card was issued will not be liable for the same,” RBI noted.