| RBI asks banks to make credit card interest payment easier for users |
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Mumbai/ Kolkata, 7 April You might get more time to repay your credit card dues without having to pay any interest or pesky fees. The Reserve Bank of India ( RBI) has asked banks to make credit card charges “ reasonable” and directed them not to levy interest on card dues till the next bill date even if payment is not made before the due date, bankers familiar with the development told Business Standard. This is the first time the regulator has addressed the issue of credit card charges and this follows RBI’s recent instructions on waiver of pre- payment charges on floating- rate consumer loans and removal of penalty for non- maintenance of minimum balance in savings deposit accounts. “So far, cardholders had to pay interest on credit card dues at expiry of the due date. This (new order) will offer them a few more interest- free days. We are revising our practice accordingly,” the chief executive of a large credit card issuer said, asking not to be named. For instance, suppose a customer has to repay his card dues on the fifth of every month, while his bill is generated on the 10 of the month. So far, if the customer did not repay his dues by the fifth day of the month, he had to pay interest. With the new instruction, the customer can pay his dues on the 10th day without an additional charge. Bankers, however, clarified that if the customer failed to clear his dues even after the next billing date, he would have to pay interest from the date of purchase. “ The idea is to make it more convenient for customers by granting a few additional days. But if they continue to delay their repayment, they will need to pay interest,” said another banker familiar with the development. For now, most banks and credit card companies appear reluctant to reduce credit card charges. Credit cards carry one of the highest interest rates — between 35 and 47 per cent a year. For select customers, certain banks charge credit card interest at a little lower rate of 24 per cent. Turn to Page 20 > Says interest on card balance should not be levied till next bill STREAMLINING CREDIT Top players in India Bank No. of cards* ( mn) HDFCBank 5.12 ICICI Bank 3.09 SBI 2.76 Citibank 2.40 Axis Bank 1.31 *As of November 2013 Source: Reserve Bank of India |
| RBI raps NBFCs for faulty computation of capital |
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BS REPORTER Mumbai, 7 April The Reserve Bank of India ( RBI) on Monday said non- banking financial companies ( NBFCs) must deduct investments made in group entities before arriving at net owned funds or NOF. NOF means the aggregate of the paid- up equity capital and free reserves after deducting accumulated balance of loss, deferred revenue expenditure and other intangible assets. The central bank’s move is in the wake of finding that certain NBFCs did not consider their investment in group companies while arriving at the NOF figure. RBI said in a communication to NBFCs that the contribution to the funds held by VCFs came primarily from NBFCs themselves. However, NBFCs argued that their investments in group companies were made by venture capital funds ( VCF) sponsored by them. RBI noted that in arriving at the NOF, the substance would take precedence over form. “NBFCs are advised to keep this principle in mind, always, while calculating their NOF.” In order to arrive at NOF, investments ( shares, debentures) in subsidiaries, group companies and other financing are also considered. RBI said that VCF or any such alternative investment fund ( AIF) means a pool of capital by investors and the investment made by such an AIF is done on behalf of the investors. While arriving at the NOF figure, investment made by an NBFC in entities of the same group concerns shall be treated alike - regardless of whether the investment is made directly or through an AIF or a VCF. The rule is also applicable in cases where an NBFC has 50 per cent or more share in funds with VCF. The ambit of rules also covers trusts where the beneficial owner is the NBFC, if 50 per cent of the funds is from this finance company. In such cases, “beneficial ownership” would mean holding the power to make or influence decisions in the Trust and being the recipient of benefits arising out of the activities of the Trust, RBI noted. The central bank’s move is in the wake of finding that certain NBFCs did not consider their investment in group companies while arriving at the NOF figure |
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