RBI has said that henceforth banks can levy a penalty on a credit cardholder only if they fail to receive payment for three days after the due date. The directive will benefit those whose payment or transfer gets delayed due to a bank holiday or for any other reason.
Besides not charging penalty, RBI has said that banks should also report delayed payment to credit information companies like Cibil only when a credit card account remains 'past due' for more than three days. At present all banks state that late payment charges are applied if payment is not made by due date. The late payment charges vary between Rs 100 to Rs 700 depending on the total payment due.
Although earlier RBI had issued a directive stating that the next statement date should be the reference date for computing penalties and reporting defaults to credit bureaus banks have continued to use the due date for imposing late fee.
In a circular issued to all banks RBI said that in order to bring in greater credit discipline as also to provide operational flexibility to credit card issuers, 'past due' status of a credit card account for classifying bad loans would be reckoned from the payment due date mentioned in the monthly credit card statement. "Consequently, in case of banks, a credit card account will be treated as non-performing asset if the minimum amount due, as mentioned in the statement, is not paid fully within 90 days from the payment due date mentioned in the statement," RBI said.
"However, banks shall report a credit card account as 'past due' to credit information companies (CICs) or levy penal charges, viz. late payment charges only when a credit card account remains 'past due' for more than three days. The number of 'days past due' and late payment charges shall, however, be computed from the payment due date mentioned in the credit card statement," RBI said. Earlier it was to be classified as NPA if payment was not received within 90 days of next statement date.
Besides not charging penalty, RBI has said that banks should also report delayed payment to credit information companies like Cibil only when a credit card account remains 'past due' for more than three days. At present all banks state that late payment charges are applied if payment is not made by due date. The late payment charges vary between Rs 100 to Rs 700 depending on the total payment due.
Although earlier RBI had issued a directive stating that the next statement date should be the reference date for computing penalties and reporting defaults to credit bureaus banks have continued to use the due date for imposing late fee.
In a circular issued to all banks RBI said that in order to bring in greater credit discipline as also to provide operational flexibility to credit card issuers, 'past due' status of a credit card account for classifying bad loans would be reckoned from the payment due date mentioned in the monthly credit card statement. "Consequently, in case of banks, a credit card account will be treated as non-performing asset if the minimum amount due, as mentioned in the statement, is not paid fully within 90 days from the payment due date mentioned in the statement," RBI said.
"However, banks shall report a credit card account as 'past due' to credit information companies (CICs) or levy penal charges, viz. late payment charges only when a credit card account remains 'past due' for more than three days. The number of 'days past due' and late payment charges shall, however, be computed from the payment due date mentioned in the credit card statement," RBI said. Earlier it was to be classified as NPA if payment was not received within 90 days of next statement date.
Complete Circular is given here under for your ready reference
RBI/2015-16/126
DBR.No.BP.BC.30/21.04.048/2015-16
July 16, 2015
All Scheduled Commercial Banks/Non-Banking Financial Companies/Primary (Urban) Co-operative Banks
Dear Sir,
Prudential Norms on Income Recognition, Asset Classification and
Provisioning pertaining to Advances – Credit Card Accounts
Please refer to circular DBOD.No.BP.BC.78/21.04.048/2013-14 dated December 20, 2013 on the captioned subject.
2. In order to bring in greater credit discipline as also to provide operational flexibility to credit card issuers, it has been decided that, with effect from the date of this circular, ‘past due’ status of a credit card account for the purpose of asset classification would be reckoned from the payment due date mentioned in the monthly credit card statement. Consequently, in case of banks, a credit card account will be treated as non-performing asset if the minimum amount due, as mentioned in the statement, is not paid fully within 90 days from the payment due date mentioned in the statement.
3. However, banks shall report a credit card account as ‘past due’ to credit information companies (CICs) or levy penal charges, viz. late payment charges, etc., if any, only when a credit card account remains ‘past due’ for more than three days. The number of ‘days past due’ and late payment charges shall, however, be computed from the payment due date mentioned in the credit card statement.
Yours faithfully,
(Sudarshan Sen)
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