No charges on limit breaches without customer consent; banks to offer full in-app controls
New Delhi – As digital payments continue to grow rapidly across India, credit card usage has also surged. But along with convenience, many cardholders often find themselves caught off-guard when they unknowingly exceed their spending limit — and banks immediately impose hefty overlimit fees. Responding to mounting consumer complaints and calls for transparency, the Reserve Bank of India (RBI) has introduced a sweeping regulatory overhaul to curb this practice.
Under the new rules, RBI has made it unequivocally clear that no bank can activate the overlimit facility without the cardholder’s explicit permission. The directive is aimed at safeguarding millions of credit card users and strengthening customer rights in the retail payments ecosystem.
End to banks’ ‘default overlimit’ play
Until now, many banks would pre-enable the overlimit feature at the time of issuing cards. Customers were often unaware of this — until the monthly bill arrived and included steep penalties.
Calling this an unfair practice, the central bank has mandated:
- Overlimit facility must be opt-in, not default
- Existing cardholders must be provided a clear choice to enable/disable it
- Banks must maintain documented proof of customer consent
RBI has also instructed lenders to ensure transparency, reasonability and caps on any overlimit charges imposed.
In-app controls for customer empowerment
To ensure real-time control, the RBI has directed that every card-issuing bank must provide a transaction management panel on all digital channels — mobile apps, online banking and web portals. The panel must allow users to:
- Enable or disable overlimit spending anytime
- Manage settings instantly, without approvals
- Receive alerts and notifications on potential breaches
This marks a major shift toward customer-driven risk control, giving users complete authority over how their credit line may be extended.
No penalty for bank or system errors
A frequent grievance among cardholders relates to limit breaches triggered by:
- Technical glitches in merchant systems
- Delayed settlements
- Bank-side operational errors
RBI has clarified that in such cases:
- No overlimit fee can be levied
- Any wrongful charges must be reversed immediately
- Customers cannot be burdened with additional interest or penalties
The directive offers significant protection to users navigating the complexities of digital transactions.
Why this reform matters
Industry data and regulatory feedback suggest that:
- Sudden overlimit charges often damage credit scores
- Consumers face avoidable financial burdens
- Banks have room to misuse discretionary controls
Financial experts say the reforms not only address malpractice but will also strengthen responsible spending habits and better financial discipline among consumers.
What to do if banks still charge you
RBI has outlined a clear redressal process:
1. Lodge a complaint with the bank’s grievance cell
2. If unresolved within 30 days, escalate to the
RBI Integrated Ombudsman Portal
3. Proven violations will require full refunds to customers
This ensures that consumers have a structured mechanism to enforce their rights.
A strong consumer shield for the digital economy
Analysts view the move as a decisive regulatory push toward fairness and trust in the credit ecosystem. The new norms are expected to:
- Improve accountability among banks
- Prevent hidden penal structures
- Boost confidence in electronic payments
As India accelerates into a digitally-driven financial future, RBI’s clampdown on unauthorized overlimit fees promises to serve as an important consumer protection milestone for the country’s fast-expanding credit card base.
