Banks have approached the Reserve Bank of India (RBI) to relax its recent guidelines to allow them to issue debit cards to customers with overdrawn (OD) accounts which are used to provide personal loans, officials said. banking sources at FE.
The banks, under the umbrella of the Association of Indian Banks (IBA), have urged the RBI to allow them to issue debit cards in OD accounts which are in the nature of personal loans, where limits are sanctioned against salary, pension, deposits and government securities, and for personal consumption. They also want to issue debit cards when such facility is extended to Mudra and Kisan credit card account holders.
The banking sources said there were no restrictions on issuing debit cards under this category of accounts before, a large number of customers availed themselves of such facility. The latest restrictions will therefore cause inconvenience to those customers who do not seek business loans through these OD accounts.
A personal loan overdraft typically allows a customer to withdraw an amount (up to a fixed limit) from their accounts at any time and repay it later with interest. This makes it one of the preferred credit options for customers to meet various personal requirements. The limit and interest rate vary by account.
“Our understanding is that there is now a ban on issuing debit cards in this category of accounts where there was no restriction before. These are genuine grievances and the matter is being reviewed with the RBI,” a source said.
In April, the RBI issued the “Primary Instructions” on debit and credit cards, a document which consolidates instructions on rules and regulations. Most of the rules in the circular were to be implemented from July 1.
At the end of June, the RBI extended the deadline for tokenization of debit and credit cards for another three months until September 30, but did not provide relief to banks for some other measures it stipulated.
Through the main circular, the central bank asked banks to formulate a comprehensive policy on issuing debit cards to customers with the approval of their boards.
He ordered banks not to issue debit cards to cash credit/loan account holders. “However, this will not prevent banks from linking the overdraft facility provided with Pradhan Mantri Jan Dhan Yojana accounts to a debit card,” the RBI said.
Banks are also mandated to undertake a review of their debit card operations on a semi-annual basis. The review should cover the analysis of card usage, including cards that are not used for long periods of time and the risks inherent therein.