With India’s increasingly digital lifestyle, credit card use has become increasingly common. People use cards for everything from online shopping to travel bookings and bill payments. However, sometimes, spending inadvertently exceeds the card limit, leading banks to charge overlimit fees and customers to pay hefty penalties. In light of increasing complaints, the Reserve Bank of India has made significant changes to the overdraft rules, providing relief to cardholders.
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According to the RBI’s new guidelines, no bank or card issuer can activate the overlimit feature on a customer’s card without their explicit permission. Previously, many banks automatically enabled this feature, leading to people spending beyond their limit without realising it. Now, this practice has been completely prohibited. Cards can only be allowed to exceed their limit after obtaining the customer’s written or digital consent.
The Reserve Bank of India has also mandated all card issuers to provide a dedicated transaction control feature on their platforms. This feature allows customers to toggle the overlimit option on or off. This control should be available on the card app, internet banking, or mobile banking. Customers can change this option at any time, giving them complete control over their card spending.
According to the regulations, if someone has not authorised the overlimit feature, the bank will not allow the card to be used beyond the limit under any circumstances. And even if a transaction exceeds the limit due to a technical glitch, the bank will not levy any overlimit charges. This move is extremely beneficial for those who inadvertently exceed the limit and later have to pay a significant amount.
The RBI has clarified that this decision was taken to reduce fraud and strengthen the financial security of cardholders. Allowing overlimits increases the risk of sudden, uncontrolled spending, which is now being addressed. This rule will encourage responsible spending and protect customers from unnecessary fees.
How the overlimit feature works is easy to understand. If a card has a limit of ₹1 lakh and the overlimit feature is enabled, the customer can transact above this limit. However, if this feature is disabled, the transaction will be immediately declined upon exceeding the limit. Following this rule, banks cannot activate it without the customer’s permission.
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If a bank has imposed an overlimit charge without permission, the customer can first file a complaint with the bank’s customer service. If a resolution is not found, they can file a complaint on the RBI Ombudsman portal, where the customer is guaranteed a full refund. The new rules strengthen customer rights and increase transparency in banking processes.