The recent trend of issuing credit cards without any consideration of the repayment capacities of the applicant has not found favour with Reserve Bank of India.

In a bid to outsmart the competition, credit card companies offer increased perks and blatantly increase the credit limits to lure in more customers.

Often, the credit card companies hound their customers with frequent calls for signing up for a credit card. Gold credit cards, Platinum credit cards, credit cards with high credit limit, credit cards with no annual fees and cards with cash rewards on first purchase are extensively marketed by banks and other issuers just to get a person into their "trap". Very little thought is given to the fact whether the customer will be able to manage his credit card debt wisely or not.

RBI observed that in a scenario where the credit card holder is not able to service his credit card debt properly, it will lead to high indebtedness. RBI is comprehensively studying the credit card market and is in the process of drafting a model code of conduct for credit card issuers. RBI wants that credit card companies should extend a credit card with credit limits compatible with a person's repayment capacity.

The easy access to credit and a booming consumer market often takes its toll on credit card holders. Unable to restraint themselves, a single shopping spree lands them into a credit card debt trap.

The problem is aggravated when the banks employ goons to recover their outstanding dues. These recovery agents, with their high-handed tactics use every trick in the book mostly illegal to squeeze the cash from these individuals.

To assess the credit worthiness of an individual, RBI has asked the banks and lending institutions to deploy a credit assessment and rating mechanism. This will help the bank to provide the right amount of credit to a person, based on his income and credit serving capacity. Also, in an effort to keep a tab on the strong arm tactics deployed by the recovery agents, RBI is formulating guidelines on the recruitment, background check and operational behavior of the debt recovery agencies and their employees.

Established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934, RBI is the premier regulator and supervisor of the financial system, which has an objective to maintain public confidence in the system, protect depositors' interest and provide cost-effective banking services to the public.