The Reserve Bank of India (RBI) has issued directives aimed at ensuring greater choice and flexibility for customers in the issuance of credit cards by card networks.
According to the RBI, authorized card networks collaborate with banks and non-bank entities for the issuance of credit cards. The decision regarding which network is utilized for a customer’s card is made by the card issuer, whether it be a bank or a non-bank institution, and is influenced by the agreements between the issuers and the card networks.
Upon review, the RBI noted that certain arrangements between card networks and issuers were limiting customers’ options. In light of this, exercising its powers under the Payment and Settlement Systems Act, 2007, the RBI has directed:
a) Card issuers shall not enter into any arrangement or agreement with card networks that restrain them from availing the services of other card networks.
b) Card issuers shall provide an option to their eligible customers to choose from multiple card networks at the time of issue. For existing cardholders, this option may be provided at the time of the next renewal.
The directive defines authorized card networks as American Express Banking Corp., Diners Club International Ltd., MasterCard Asia/Pacific Pte. Ltd., National Payments Corporation of India–Rupay, and Visa Worldwide Pte. Limited.
Both card issuers and networks must adhere to these requirements in existing agreements, upon amendment or renewal, as well as in new agreements, said the RBI.
However, it clarified that these directions do not apply to credit card issuers with fewer than 10 lakh active cards.
Issuers who issue credit cards on their own authorized card network are exempt from the circular’s applicability.
The directive regarding customer choice at the time of issuance will come into effect six months from the March 6, 2024.
