Par panel for capping of interest rates on credit cards

Concerned over the exploitation of credit card holders, a Parliamentary Committee has suggested that RBI should prescribe maximum interest rate that can be charged by banks from customers.

Concerned over the exploitation of credit card holders, a Parliamentary Committee has suggested that RBI should prescribe maximum interest rate that can be charged by banks from customers.

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"Maximum interest rates to be charged (by banks from credit card customers) may be specified so as not to allow exploitation of customers by banks," a report of the Standing Committee on Finance, which was tabled in Parliament recently, said.

The Committee did not agree with the contention of the Finance Ministry that credit card dues are in the nature of non-priority sector personal loans and hence, the banks should be free to decide the interest rates.

Even the RBI's circular covering various aspects relating to credit card operations of banks has not been of much help in addressing the grievances and complaints of general public, the committee noted.

"The effectiveness of such circulars in bringing down the credit card related complaints is doubtful given the past record," the report of the committee said.

The Reserve Bank's circular asks banks to ensure prudence while issuing credit cards, avoid issuing unsolicited cards, third party agents for debt collection should not resort to intimidation or harassment, among others.

As of February, total number of outstanding credit cards in the country is 202 lakh, as per RBI's April bulletin.

The number of credit cards has been declining in the last two years. It was 247 lakh in March 2009 and 275 lakh in March 2008.