The Indian Ministry of Finance is considering reducing the interest rates banks can charge on consumers’ outstanding card debts to make owning credit cards more affordable and to encourage mobile payments.
A committee established under the ministry will review bank interest rates as part of a broad reform of electronic payments in India, a ministry source within tells PaymentsSource. Members of the committee include finance ministry officials, central bank officials, consultants, and payments executives from state-owned banks, he says.
Indian banks charge at minimum a 36% annual interest rate when the cardholder makes a payment after the due date. Some banks also reserve the right to increase their rate to as high as 45% when cardholders frequently pay late.
The ministry contends card spending has risen over the past couple of years, creating an opportunity for issuers to reduce costs associated with having a credit card, according to the ministry source.
Indian credit cardholders in September spent 76.9 billion rupees (US$1.5 billion or 1.1 billion euros), up 31.7% from 58.4 billion rupees during the same month last year, according to the latest data from the Reserve Bank of India.
The committee’s main objective would be to work out a process to introduce reforms focused on ATM use and the use of credit cards, debit cards, mobile and other electronic payments, he adds.
“The fiercest focus is on mobile payments and how they can be an alternative to credit and debit cards,” the ministry source says. “The committee would work towards preparing a blueprint for setting up a national infrastructure for mobile payments.”
The ministry’s intention to increase its focus on mobile payments became apparent when the
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