Rbi builtens news

The Future of Credit Card Payment is

Square
JANUARY 23, 2010

Last month Jack Dorsey the creator of Twitter unveiled his new device and service to
make bulky and expensive credit card swiping machines – History.
The Solution goes by the nameSquare and is being funded byVinod Khosla of Khosla
Venturesfame.(Editors Note – Vinod Khosla is also an investor in SKS Microfinance
and Grama Vidiyal Microfinance)

Square - Easy way to recieve credit card payments

Twitter co-founder Jack Dorsey announced his new company  in appropriate fashion:
with a tweet on the network he created in 2006. His new company,Square, allows
merchants and individuals to accept secure payment from credit (and other) cards using
a mobile phone.
According to Square’s website, payees can start accepting payments via Square in
under 60 seconds, with “no contracts, monthly fees, or hidden costs.” The company
donates one cent from every transaction to the charity of the payer’s choice. In order to
 streamline the process, payees can register for Square and upload a photo, so that
payees can verify that you are who you say you are.
Given below is a CNBC Interview with Jack Dorsey, founder of Twitter who explains
what Square is about and demonstrates how this credit card swiping system works

{ 1 comment }
CreditCardProf March 19, 2010 at 9:48 pm
this is based on obsolete technology, swiping is out! what about CHIP&PIN? It
will come to the US sooner or later. RFID should be the way to go for small
payments, as it is done already in the US and Europe….and RFID enabled
phones can already accept cards.
and what about the acceptance fees? they must be high as neither credit card
scheme allows the use of a master merchant. i have doubts that this will ever
take off.
C OMME NT S O N TH IS E NT RY A RE C LO SE D.

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Usage of credit cards on the rise again
Partha Sinha, TNN, Jul 29, 2010, 01.09am IST

Article

Comments

Tags:Usage|Reserve Bank Of India|Credit Card|Banking

MUMBAI: Credit card use — a strong indicator of consumer confidence — is on the
rebound, touching a 15-month high in May. While consumer confidence is one factor
triggering such high transactions, the move by banks to ramp up the credit card business,
acceptance of plastic money for routine deals and increased security aspects are also aiding
the surge, experts said. 

Consider this: In May this year, nearly 2.1 crore point of sale (PoS) transactions were done
using credit cards as compared to 1.98 crore such transactions in April. The May figure was
the highest since January 2009 figure of 2.18 crore swipes, data in RBI's Monthly Bulletin
for July showed. 

In terms of value, aggregate transactions in May was worth Rs 5,936 crore, the second
highest figure in the last 18 months with the highest being Rs 6,770 crore in March.
The Reserve Bank of Indiadata showed that the highest-ever monthly swipes and value were
recorded in October 2008, just before the US economy started showing signs of extreme
weakness. In that month, 2.4 crore swipes led to PoS transactions worth Rs 6,442 crore. 

"This rise was primarily because credit cards issued by banks, excluding those withdrawn or
blocked, increased from 1.83 crore cards in March to 1.93 crore cards in April," said Piyush
Khaitan, MD, Venture Infotek Global, a major player in processing credit and debit card
transactions using PoS terminals. During the previous two financial years, banks in India
exercised extreme caution while issuing credit cards. With 2.68 crore credit cards in
circulation in September 2008, the downward trend continued right till March 2010.
However, "Since 10 lakh cards were issued in April this year, their effect in terms of
increased usage was witnessed in May," Khaitan said. 

Apart from the push by banks to net new customers, experts feel the growth was aided by
the fact that people have regained their faith in the economy and are more confident about
retaining their jobs. The RBI had a small role to play in the surge.
RBI’s New Guidelines On Credit Cards
Last Updated: 2010-07-10T14:45:28+05:30
On receiving various complaints regarding credit cards, the Reserve Bank of India has issued fresh
guidelines and warned banks and financial institutions to follow the rules strictly.
 
Credit card holders are said to be suffering higher charges, poor response from banks and inappropriate ...

RBI push banks on credit card transparency issue

Posted: Jul 10, 2010 |Comments: 0 |
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The Reserve Bank of India (RBI) has come down on banks and financial body for the lack of
transparency in credit card process, especially in charging interest rates and levying other fees on
customers.
Despite the issue of comprehensive instructions to banks, the RBI and the Banking Ombudsmen
continue to receive numerous complaints from credit card holders regarding the credit card operations
of the banks, especially with regard to excessive finance charges, issuance of unsolicited credit cards,
unsolicited insurance policies and recovery of premium charges, charging of annual fee in spite of
being offered as ‘free' cards, issuance of loans over phone, disputes over wrong billing, settlement
offers conveyed telephonically, non-settlement of insurance claims after the demise of the card holder,
offensive calls, difficulty in accessing the credit card issuers and the poor response from the call
centres, the RBI said.
The number of outstanding credit cards in India fell to 182.88 lakh by April 2010 from 275.4 lakh
cards in March 2008. On the other hand, the number of debit cards rose to 1,847.9 lakh from 1,024.3
lakh in March 2008.

"All banks are once again advised to strictly adhere to the guidelines contained in the Master Circular
on credit card operations, both in letter and spirit, failing which Reserve Bank will be constrained to
initiate suitable penal action, including levy of monetary penalties, under the relevant statutory
provisions," it warned.

The guidelines on credit card operations cover various aspects such as issue of credit cards, interest
rates and other charges, wrongful billing, use of direct sales agents (DSAs), direct marketing agents
(DMAs) and other agents, protection of customer rights covering among other things right to privacy,
customer confidentiality and fair practices in debt collection, redressal of customer grievances, internal
control and monitoring systems, fraud control etc. Banks have been advised as part of the said
guidelines that the RBI reserves the right to impose penalty on a bank or NBFC under the provisions of
the Banking Regulation Act, 1949, the Reserve Bank of India Act, 1934, respectively for violation of
any of these guidelines," the RBI said.

Banks should prescribe a ceiling rate of interest, including processing and other charges in respect of
small value personal loans and loans similar in nature. These instructions are applicable to credit card
dues also. In case, banks and NBFCs charge interest rates which vary based on the payment or
default history of the cardholder, there should be transparency in levying of such differential interest
rates. "In other words, the fact that higher interest rates are being charged to the cardholder on
account of his payment / default history should be made known to the cardholder," the RBI said.
For this purpose, the banks should publicise through their website and other means, the interest rates
charged to various categories of customers. The RBI asked banks and NBFCs that they should indicate
to the credit card holder upfront, the methodology of calculation of finance charges with illustrative
examples, particularly in situations where only a part of the amount outstanding is paid by the
customer.

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Under Creative Commons License: Attribution

Rbi Push Banks on Credit Card Transparency Issue

Published by: Hardeep Singh (

The Reserve Bank of India (RBI) has come down on banks and financial body for the
lack of transparency in credit card process, especially in charging interest rates and
levying other fees on customers.
Despite the issue of comprehensive instructions to banks, the RBI and the Banking
Ombudsmen continue to receive numerous complaints from credit card holders
regarding the credit card operations of the banks, especially with regard to excessive
finance charges, issuance of unsolicited credit cards, unsolicited insurance policies and
recovery of premium charges, charging of annual fee in spite of being offered as 'free'
cards, issuance of loans over phone, disputes over wrong billing, settlement offers
conveyed telephonically, non-settlement of insurance claims after the demise of the
card holder, offensive calls, difficulty in accessing the credit card issuers and the poor
response from the call centres, the RBI said.
The number of outstanding credit cards in India fell to 182.88 lakh by April 2010 from
275.4 lakh cards in March 2008. On the other hand, the number of debit cards rose to
1,847.9 lakh from 1,024.3 lakh in March 2008.
"All banks are once again advised to strictly adhere to the guidelines contained in the
Master Circular on credit card operations, both in letter and spirit, failing which Reserve
Bank will be constrained to initiate suitable penal action, including levy of monetary
penalties, under the relevant statutory provisions," it warned.
The guidelines on credit card operations cover various aspects such as issue of credit
cards, interest rates and other charges, wrongful billing, use of direct sales agents
(DSAs), direct marketing agents (DMAs) and other agents, protection of customer
rights covering among other things right to privacy, customer confidentiality and fair
practices in debt collection, redressal of customer grievances, internal control and
monitoring systems, fraud control etc. Banks have been advised as part of the said
guidelines that the RBI reserves the right to impose penalty on a bank or NBFC under
the provisions of the Banking Regulation Act, 1949, the Reserve Bank of India Act,
1934, respectively for violation of any of these guidelines," the RBI said.
Banks should prescribe a ceiling rate of interest, including processing and other charges
in respect of small value personal loans and loans similar in nature. These instructions
are applicable to credit card dues also. In case, banks and NBFCs charge interest rates
which vary based on the payment or default history of the cardholder, there should be
transparency in levying of such differential interest rates. "In other words, the fact that
higher interest rates are being charged to the cardholder on account of his payment /
default history should be made known to the cardholder," the RBI said.
For this purpose, the banks should publicise through their website and other means, the
interest rates charged to various categories of customers. The RBI asked banks and
NBFCs that they should indicate to the credit card holder upfront, the methodology of
calculation of finance charges with illustrative examples, particularly in situations where
only a part of the amount outstanding is paid by the customer.
About Author 
The Reserve Bank of India (RBI) has come down on banks and financial body for the lack of
transparency in credit card process,

Bank credit may become costliest in a decade

By Anup Roy & Joel Rebello Mint, New Delhi

Publication: Mint, New Delhi

Date: Thursday, January 6 20

Jan. 06--The latest round of rate hikes by Indian banks has taken loan rates closer to their pre-credit crisis
peak in 2008 and rates could even go up further, making money costliest in a decade for corporations as
well as individuals.
Bank analysts say that lending rates have room to go up by 25-75 basis points (bps) in 2011.
One basis point is one-hundredth of a percentage point

Many banks, including the country's largest lender State Bank of India (SBI ) and second largest ICICI
Bank Ltd, hiked their lending rates this month. With the latest round of rate hikes, the gap between the
policy rate of the central bank and the lending rate of banks is at the highest ever.

The pre-crisis level policy rate of the Reserve Bank of India (RBI) was at 9%, which made the gap
between the policy rate and the prime lending rate (PLR) of public sector banks 4.25 percentage points.
Now RBI's policy rate is at 6.25%, and the gap has widened to 6.5 percentage points.

For technical reasons, Indian banks have two loan rates. PLR, theoretically meant for the best customers
of the bank, is still in vogue even as the base rate, or the minimum lending rate, came into effect in July.
All fresh loans are linked to the base rate whereas the old customers are serviced through PLRs. Any
change in PLRs affects the old customers of the banks. According to a rough estimate by the analysts,
around 70-75% of the loans in the banking system are still linked to the PLR system.

SBI hiked its base rate by 40 bps to 8% last week and PLR by 25 bps to 12.75%. The bank's pre-crisis
level PLR was 13.25%--a level that analysts expect will soon be reached.

With the recent hike, ICICI Bank's PLR stood 0.25% higher at 17%, just 25 bps lower than its 2008 rate.
The bank raised its base rate by 0.50% to 8.25%.

Many banks have raised their loan rates twice in the past one month. The lending rate hikes are
accompanied by deposit rate hikes.

Ankit Ladhani, research analyst at Sharekhan Ltd, said banks have been forced to hike lending rates to
maintain their margins because scarce money in the banking system has forced them to pay more to
garner deposits.

"Banks are looking to keep their net interest margins at 2.5% at the minimum and since some of them are
offering deposit rates at 9%, the lending has to be at at least 11.5% to maintain margins," he said.

"The PLR of private sector banks has generally remained 100-125 bps above the PLR of the public sector
banks during the period March 2004 to June 2007, before expanding to 200 bps during June 2007 to
June 2008," said P. Soujanya, group head of public sector banks at Care Ratings Ltd.

"Post September 2008, the gap has increased by 300-400 bps. However, much of the lending during this
period was below PLR," she said.
Lending rates are likely to go up further as expectations are that RBI will hike its policy rate by at least 25
bp in its monetary policy review later this month.

Kajal Gandhi, assistant vice- president at ICICI Securities Ltd, said the hike could incr

Kajal Gandhi, assistant vice- president at ICICI Securities Ltd, said the hike could increase pressure on
credit growth and year-on-year growth may fall further as lending may not keep pace with the year-ago
quarter.

"The last quarter of 2009-10 saw a robust 22% growth and this time it's going to be much lower. Demand
for credit from small- and mid-cap companies has not been there this year as companies have put their
plans on hold because of global uncertainties. And now with rates at historic highs, they cannot take loans
because it will hit their bottomline," she said.

According to the latest RBI data, credit in the banking system is growing at 23.7%, but deposits are
growing at 14.7%. Hence, banks are unable to fund this credit growth through the deposits they are
garnering. To attract more deposits, they are forced to hike their deposit rates, which again pushes up
the cost of funds.
According to Rupa Rege Nitsure, chief economist of Bank of Baroda, banks' dependence on wholesale
deposits, or high-cost deposits from firms, has risen. She estimates that around 25-30% of the banking
system's time deposit base is constituted by wholesale deposits.

Banks' dependence on such deposits and the increase in short-term certificate of deposits--their
proportion in bank balance sheet has increased from 3% to around 9%--have ensured that any deposit
rate hike is instantaneous.

According to Nitsure, banks' reluctance to increase deposit rates even when inflation was ruling at double
digits forced retail depositors to shun the banking channel.

"It was definitely a serious mistake in resource management by banks that they did not hike the deposit
rates. Now it is late and banks have to depend on wholesale deposits for some more time as retail
investors will take time to put their money in the banking system, expecting more deposit rate hikes in the
future," Nitsure said.

To attract depositors, SBI has increased its deposit rates by 50-100 bps. A 555-day deposit with the bank
now attracts 9% interest against 8.5% earlier. Also, for deposits between 7 days and 14 days, and 15
days and 45 days, the bank is offering interest rates of 4% and 5%.
According to analysts, this will in time result into customers withdrawing their money from savings
deposits, which give an interest rate of 3.5%.

"It will be interesting to see how savings account customers behave. If they start withdrawing money from
the savings account for these schemes, it will affect many banks' profit margins," said an analyst with a
domestic brokerage firm.
A research note of Edelweiss Securities Ltd said smaller public sector banks will be more affected than
larger public sector banks and private banks.

anup.r@livemint.com

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