The Reserve Bank of India [Get Quote], in an effort to make the credit card operations more transparent, may make it mandatory for banks to refund the small credit balance to cardholders if the credit card is rendered inactive for more than six months. This is for credit cardholders who have a credit balance of Rs 100 or lower in the account.

In its observations, the RBI found that there has been various instances where the foreign and private sector banks stops sending the statement if the card is rendered inactive for six months.

Thereafter the credit balance is written off to a suspense account and then transferred to the profit and loss account.

The practice followed by PSU banks is to hold the account for eight years before writing off the account.

Some major foreign banks with very wide presence in the credit card business have even amended their policy of writing off the credit balance in inactive credit card holders after being pulled up by the RBI in its recent inspection, said bankers.

Bankers explained that even if these credit balances are of very small denomination, the amount becomes large after accumulation which is transferred to the profit and loss account. In fact, the RBI has asked most of the banks to inform it about the practice of managing the credit balance of the customer.

It has also asked various banks to justify the practice of writing off small balance in the credit card.

Usually a customer rounds off the amount and tends to give more than the credit card balance. The extra amount over and above the credit card bill forms part of the credit balance in the customers account. This gets adjusted in the next month's credit card bill but gets accumulated if the card is not put to use.

Even if the card is rendered inactive, six month is a very less period to suspend the activity and to transfer the amount to the profit and loss account, said a banker.

The RBI is of the view that the card holder be informed of the credit balance and amount be refunded if the cardholder confirms that the card is no more valid in transaction.