RBI tightens minimum due norms for credit card issuers

The Reserve Bank of India (RBI) has asked banks to classify credit card dues outstanding as bad loans or non-performing assets if customers fail to pay up within a stipulated period of 90 days.

"It is advised that 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 next statement date," RBI said, adding that the norms have been tightened with a view to bringing consistency and inducing transparency.

As of now, the amount spent by credit card users is billed through a monthly statement with a definite due date for repayment. Banks give an option to the card users to pay either the full amount or a fraction of it, ie, minimum amount due, on the due date and roll-over the balance amount to the subsequent months' billing cycle.

RBI noted that banks follow divergent practices with regard to asset classification status of credit card accounts if minimum amount due is not paid on the specified due date. While some banks reckon the due date specified in the statement for payment of minimum amount due to determine the over-due status, some banks reckon the subsequent billing date to determine the over-due status of the minimum amount due.

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 next statement date. The gap between two statements should not be more than a month, RBI said.

Banks should also follow this uniform method of determining over-due status for credit card accounts while reporting to credit information companies and for the purpose of levying of penal charges, viz, late payment charges, etc, if any, RBI added.