The Reserve Bank of India has introduced a 3-day grace period for credit card users, marking a significant shift in how late fees are calculated. According to reports from Upstox, under the updated norms, card-issuers shall report a credit card account as 'past due' only when a credit card account remains 'past due' for more than three days. This means that if users miss their due date by just a couple of days, their account won't be instantly tagged as overdue, providing much-needed breathing room for cardholders.
The RBI has also addressed the calculation method for late payment charges, ensuring a more equitable system for cardholders. As reported by Upstox, late payment charges and other related charges shall be levied only on the outstanding amount after the due date, and not on the total amount due. This means users won't be penalised on amounts they may have already paid, making the system significantly fairer and reducing unnecessary financial burden on late payers.
The amendment modifies paragraph 23(5) of the existing regulations, as confirmed by the RBI. According to the regulator's statement, the number of 'days past due' shall be computed from the payment due date mentioned in the credit card statement. The updated directions align with wider regulatory directions issued under Section 35A of the Banking Regulation Act, 1949, ensuring comprehensive regulatory coverage for credit card operations.
The new rules will not take immediate effect, with the RBI confirming that the above amendments shall come into force from April 01, 2027. This timeline provides card issuers with adequate preparation time to update their systems and processes to comply with the new regulations. The changes come after the RBI reviewed industry feedback and incorporated suitable modifications based on stakeholder responses to the draft directions.
