Ignore small fractions
Pushpa Girimaji

WITH the disappearance of small coins, it is now more or less a convention that in all transactions, fractions of a rupee below 50 paise are to be ignored. However, credit card companies persist in sending bills with small fractions of a rupee, and credit card holders who have followed the general convention and ignored the small fractions while paying the bill have had to pay a heavy price.

Suppose your credit card bill for a particular month is Rs 20,000 and 26 paise. You pay Rs 20,000 and ignore the paise. The credit card company, however, does not ignore it, but treats the amount as 'unpaid' , and in the next bill, you will be charged interest on not just that 26 paise but on the entire transactions on your card that month. Since the rate of interest charged by these companies is steep, you may well end up with a huge sum as interest, particularly if your purchases or transactions on the card are heavy that month.

Consumers who have protested and refused to pay the interest on the ground that it was patently unfair, have found themselves in a losing battle. A client, for example, who ignored 41 paise while paying Rs 89,425 on his credit card bill, found to his horror that in the next bill, he was charged an interest of Rs 7257.21.

This is nothing but sheer exploitation, and the banking regulator should take note of this practice and stop credit card companies from putting small fractions in the bill, and then treating such fractions of a rupee left unpaid as ‘amount due’ from the client. Fractions below 50 paise should be ignored and those above 50 paise could be rounded off to the nearest rupee as is being done in most transactions.

In fact the Reserve Bank of India has for long been advising banks to follow such a practice in their transactions. In its communication dated March 30, 2007, addressed to all commercial banks, the banking regulator reminded banks about an earlier circular on the issue and said banks were advised that all transactions, including payment of interest on deposits/charging of interest on advances, should be rounded off to the nearest rupee—that is, fractions of 50 paise and above shall be rounded off to the next higher rupee and fraction of less than 50 paise shall be ignored.

It was also advised that the issue prices of cash certificates should also be rounded off in the same manner. Banks were, however, advised that cheques issued by clients containing fractions of a rupee should not be rejected or dishonoured. Similarly, in its circular dated April 9, 2007, addressed to all State and Central Cooperative Banks, the RBI tendered identical advice. It's time the banking regulator sent out a similar advisory to all credit card companies so that this unfair trade practice is discontinued.

Ironically, in any transaction involving small change or fractions, it seems like it is always the consumer who is the victim. A study commissioned by the RBI and conducted by the Birla Institute of Technology and Science, Pilani, on the ‘Need and use behaviour for small denomination coins" showed how traders exploited customers vis-à-vis small denomination coins.

Either way, the trader benefited and, therefore, did not make serious efforts to procure and stock coins, thereby resulting in poor availability of small denomination coins, the study said. Conducted in five urban and five rural locations of Bihar, UP and West Bengal, the study also remarked on the passive nature of the clients and their unwillingness to protest and, thereby, 'displease' the trader.

In the case of Awaz vs RBI and Ors, the national consumer disputes redressal commission came down heavily on credit card companies for charging usurious rate of interest, and said levying interest beyond 30 per cent on credit card dues constituted an unfair trade practice. The practice of treating an unpaid 21 paise or 40 paise in a bill as 'amount due' is equally deplorable. Will the banking regulator please take note and do the needful?