India Credit Card Interest
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
Factors Determining Credit Card Interest India
The credit card interest rate in India varies from bank to bank and even person to person, depending on their credit worthiness. However, broadly speaking, banks setup credit card interest in India by taking into consideration the following factors:
Prime Lending Rate (PLR): This is the benchmark rate, based on which banks establish the interest rates of various loan products. For instance, a bank may decide to setup a credit card interest at a fixed rate of 0.5% over the PLR. This implies that if the PLR increases or decreases, the card interest will vary accordingly.
Repo rate: This is the rate at which the Reserve Bank of India lends money to other commercial banks in the nation. Consequently, if this rate increases, the banks charge higher interest rates on its credit cards.
Reverse repo rate: This is the rate at which the RBI borrows from commercial banks. Therefore, if this rate is high, the banks have more funds and are willing to lower credit card rates.
Cap on Credit Card Interest India
The Supreme Court enforced a judgment on capping credit card interest rates at 30 percent in 2008. According to Business Standard, the annualized range of interest charged by major banks in the absence of the interest cap was:
|
Bank
|
Interest Range (%)
|
|
Citibank |
18.00-42.00 |
|
ICICI |
18.00-49.36 |
|
Standard Chartered |
23.88-40.80 |
|
HSBC |
33.00-38.40 |
|
HDFC |
36.60-39.00 |
The interest rates charged by these banks were higher in case of late payments. In fact, consumer group ‘Awaaz’ claimed that the interest rate in case of default may go as high as 90 percent, including hidden costs.
The SC ruling has, however, been contested by the Indian Banks’ Association and several major banks in the nations, including Citibank, HSBC and Standard Chartered Bank. The main justification given in favor of the resistance is that capping the interest rate will only add to the cardholders’ burden. This is because the banks may be forced to increase their annual membership fees to cover against possible delinquencies. Several foreign bank officials have also voiced that charging a higher interest rate encourages timely repayments and avoid defaults. Despite these rational arguments, the Supreme Court has retained its order on interest cap, as of 2009.
Browse India Credit Cards on EconomyWatch.com
