December 18, 2007
In an effort to make the credit card operations more transparent,
RBI may make it compulsory for banks to repay the small credit
balance to cardholders in case the card is left inactive for
more than six months. The rule applies for cardholders who have
a credit balance of Rs 100 or lower in the account.
The RBI has observed that there has been various cases where
the foreign and private sector banks stops sending the statement
if the card is rendered inactive for six months. Thereafter
the credit balance is written off to a suspense account and
then transferred to the profit and loss account. The practice
followed by PSU banks is to hold the account for eight years
before writing off the account.
Some major players in the credit card business have even altered
their policy of writing off the credit balance in inactive credit
card holders after being pulled up by the RBI in its recent
inspection, according to Bankers.
Bankers explained that even if these credit balances are of
very small denomination, the amount becomes large after accumulation
which is transferred to the profit and loss account. In fact,
the RBI has asked most of the banks to inform it about the practice
of managing the credit balance of the customer. It has also
asked various banks to justify the practice of writing off small
balance in the credit card.
The RBI is of the opinion that card holder should be made aware
of the credit balance and amount be returned if the cardholder
validates that the card is no more valid in transaction.