RBI draws flak from panel

The carte blanche given to private and foreign banks by the Reserve Bank of India to charge interest rates on credit cards at their whims and fancy has come in for severe criticism by the parliamentary standing committee on finance.
The parliamentary standing committee on finance has asked the RBI to see that the interest rates on credit cards are not open ended and left to the discretion of the banks.
The panel, headed by Dr Murli Manohar Joshi said that banks have been given complete freedom to charge any rate of interest regardless of their benchmark prime lending rate, thereby enabling them to charge exorbitant interest.
“The committee would recommend that the interest rates charged on credit card outstandings as well as the financial charges levied should not remain open-ended, left to the discretion of the banks,” the committee said in a report.
Currently, the rate of interest on credit cards vary between 42 per cent and 49 per cent per annum and are a huge burden on the users.
The committee also pulled up the RBI for not taking the complaints of users of credit card with seriousness. “The committee is unhappy to note that the RBI has not been treating credit card related grievances and complaints of the general public with due seriousness,” the report said.
According to the committee, in 2008-09, credit card related complaints received by RBI constituted 25.32 per cent of the total complaints received during the year. In 2007-08, credit card related complaints pertaining to private sector and foreign banks received at the offices of Banking Ombudsmen totalled 22.10 per cent and 50.37 per cent respectively of the total complaints.
“This points to the fact that banking services are far from satisfactory in credit card related matters. Despite a good percentage of complaints relating to credit cards, surprisingly, RBI study on this matter didn’t reveal any regulatory lapses at all,” said the report.

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