The Hindu Business Line : IBA to take up cap on credit for cardholders with RBI

BANKS are not in favour of the Reserve Bank of India's proposal to put a cap on the aggregate credit that a credit card holder can avail himself of, irrespective of the number of cards he holds.

The Indian Banks' Association (IBA), the apex body of bankers, will take up the issue with the RBI shortly.

Bankers say it will be difficult for them to implement such a system. The criteria being followed in fixing the maximum credit limit for a customer may vary from bank to bank.

The RBI in its draft guidelines issued recently suggested,"As holding several credit cards enhances the total credit available to any consumer, banks may fix maximum credit limit having regard to the means of the customer." According to bankers, such a policy is not being followed in any country.

Mr H.N. Sinor, Chief Executive, IBA, said that although card issuing banks have agreed to 90 per cent of the RBI's suggestions, few issues require clarity, as they have no global examples. The common credit limit, Mr Sinor said is a sore point with banks. "There is no way the credit limit can be aggregated. The benchmark with regard to the credit limit is usually not more than three times the monthly salary. But the RBI's concern is that if this limit is permitted by five different banks, it will give rise to a high degree of indebtedness," Mr Sinor said.

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