To,
All Non-Banking Financial Companies (NBFCs)
Including Residuary Non- Banking Companies (RNBCs)
Dear Sirs,
Issue of Co-branded Credit Cards
Please refer to paragraph No. 153 of the Mid-Term
Review of Annual Policy Statement for the year 2006-07 (copy enclosed) announced
by the Governor on October 31, 2006.
2. In order to strengthen the NBFC sector
by allowing diversification of their area of business, it has been decided to
allow NBFCs, selectively, registered with the Reserve Bank of India to issue
co-branded credit cards with scheduled commercial banks, without risk sharing,
with prior approval of the Reserve Bank , for an initial period of two years
and a review thereafter. NBFCs fulfilling the following minimum requirements
are eligible to apply:
(i) Minimum net owned fund of Rs.100 crore;
(ii) The company should have made net profit
as per last two years audited balance sheet;
(iii) The percentage of net NPAs to net advances
of the NBFC as per the last audited balance sheet should not be more than 3%;
(iv) The non-deposit-taking NBFCs (NBFCs-ND)
should have CRAR of 10% and deposit-taking NBFCs (NBFCs-D) should have CRAR
of 12% or 15%, as applicable to the company.
3. In addition, the NBFCs would be required
to adhere to the following stipulations:
i) Operational Aspects
a) The role of the NBFC under the tie-up arrangement
should be limited only to marketing and distribution of the co-branded credit
cards. The co-branded credit card issuing bank would be subject to all the
instructions / guidelines issued by its concerned regulatory authority.
b) The co-branded credit card issuing bank
would be solely responsible for fulfillment of KYC requirements in respect of
all co-branded cards issued under the tie-up arrangement.
c) The risks, if any, involved in co-branded
credit cards business should not get transferred to the business of the NBFC;
d) The co-branded credit card account should
be maintained by the customer with the bank and all the payments by the co-branded
card holders should be in the name of the bank; account if any maintained by
the user with the NBFC should not be debited for settlement of dues arising
out of co-branded credit card;
e) The NBFC entering into tie-up should be guided
by the need to ensure confidentiality of the customer’s accounts. The co-branding
NBFC should not reveal any information relating to customers obtained at the
time of opening the account and the co-branded credit card issuing bank should
not be permitted to access any details of customers’ accounts that may violate
NBFCs ‘ secrecy obligations.
d) The bank issuing the card should put in
place suitable mechanism for the redressal of customer grievances. Customer
complaints arising out of deficiency in the credit card service shall be the
responsibility of the bank.
e) Legal risk, if any, arising out of court
cases, damages, etc shall be borne by the issuing bank.
ii) Other Aspects
a) The NBFC should have put in place guidelines
on fair practices code as required in terms of circular DNBS.PD.
CC 80/10.03.042/2006-07 dated September 28, 2006;
b) The NBFC should be adhering to Know Your
Customer Guidelines and provisions of prevention of Money Laundering Act;
c) The NBFC should be complying with Non-Banking
Financial Companies Acceptance of Public Deposits ( Reserve Bank) Directions,
1998 and/or Non-Banking Financial Companies Prudential Norms (Reserve Bank)
Directions, 1998, any other instructions and provisions of RBI Act, 1934 to
the extent applicable to the NBFC concerned;
d) The NBFC should comply with other terms
and conditions as the Bank may specify in this behalf from time to time.
4. The permission is liable to be withdrawn
with a notice period of 3 months in the event of any undesirable / unhealthy
operations coming to the notice of the Bank.
5. Please acknowledge receipt to the Regional
Office of the Department of Non-Banking Supervision, Reserve Bank of India under
whose jurisdiction the Registered Office of your company is situated.
Yours faithfully,
(P. Krishnamurthy)
Chief General Manager-in-Charge