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Indian Credit Card Holders Should Expect Annual Card Fee’s
02 October 2008


Indian credit card issuers that have been lobbying for an end to the cap on penal rates of interest are upgrading existing customers to platinum or titanium cards. Card issuing banks are doing this in the eventuality that the Supreme Court upholds the National Consumer Disputes Redressal Commissions decision to cap interest rates at 30%. The Supreme Court of India had earlier deferred making a decision on the legality of commission’s directive, choosing instead to seek the RBI’s response first. The RBI is India’s central bank, determining monetary policy and acts as India’s banking regulator. The Supreme Court is expected to deliver a verdict in the next few days. If the Supreme Court upholds the directive, credit card issuers will be left with little alternative but to either increase their annual fees, or introduce them in cases fees had waived in the past. Banks had previously compromised on credit quality and were facing above average delinquencies on unsecured lending such as personal loans or credit cards. In order to compensate, penal rates of interest rates were being charged of up to 50% and ordinary rates were not much lower. The commission had effectively ended that practice with its ruling, and the banks as a result primarily multinational ones, formed an industry lobby and appealed this decision to the Supreme Court. If Interest rates are indeed capped by the Supreme Court, card issuing banks will start charging hefty fees to recoup some of the losses they have incurred in the past from lending to laxly. The banks had argued that their cost structures required them to charge what the commission viewed as being “excessive penal rates of interest”. Banks have begun upgrading their customers into platinum or titanium card holders in anticipation that the Supreme Court would rule against them. Platinum and Titanium cards carry annual fees for which the holder receive some undefined benefits, depending on who the issuer happens to be. Banks have been wary of pushing annual fees on existing customers for fear of losing them altogether.

Source : a
  

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