© The Indian Express Pvt Ltd
Tags:
Journalism of Courage
The Reserve Bank of India (RBI) has directed credit card issuers to give customers an option to choose from multiple card networks. The regulator has restricted card issuers from entering into any kind of exclusive arrangements with a card network for the issuance of credit cards. The move is beneficial for customers as they will get the freedom to choose from multiple card networks.
What does the announcement entail?
The RBI has ordered banks and non-banks that issue credit cards not to enter into any arrangement or agreement with card networks that restrain them from availing the services of other card networks.
The card issuers should provide an option to their eligible customers to choose from multiple card networks at the time of issue, it said. The regulator has given a timeline of six months to card issuers to follow the new norms.
Why have new directions been issued?
There are five authorised card networks in India: American Express Banking Corp, Diners Club International Ltd, MasterCard Asia/ Pacific Pte Ltd, National Payments Corporation of India–Rupay, and Visa Worldwide Pte Ltd.
These authorised card networks tie up with banks or non-banks (card issuers) for the issuance of credit cards. The choice of network for a card issued to a customer is decided by the card issuer and is linked to the arrangements that the card issuers have with card networks in terms of their bilateral agreements.
After a review, the RBI found that some of these arrangements existing between card networks and card issuers are not conducive to the availability of choice for customers.
In July last year, the central bank came out with a draft circular on arrangements with card networks for the issuance of debit, credit and prepaid cards. However, on March 6, the regulator issued the final norms on arrangements with card networks for the issuance of credit cards.
How will the new norms benefit customers?
With the new directions in place, eligible customers will get to choose one among the multiple card networks. Banks and non-banks will not be able to force customers to take credit cards issued by a particular card network with whom they have any tie-ups. The move will boost competition among card networks as they will have to issue cards with attractive features.
The RBI said for existing cardholders, the option to choose the card network should be provided at the time of the next renewal of the credit card.
Is there any exclusion?
The regulator said the new directions are not applicable to credit card issuers with the number of active cards issued by them being 10 lakh or less in number.
The RBI also said that card issuers such as American Express, who issue credit cards on their own authorised card network, are excluded from the new norms.
The number of outstanding credit cards at the end of January 31, 2024, stood at 9.95 crore, as per the RBI’s latest data. Some of the top credit card issuers include HDFC Bank (2.01 crore), SBI Cards (1.86 crore), ICICI Bank (1.68 crore) and Axis Bank (1.37 crore).
