In a move to expand customer options and flexibility in credit card issuance, the Reserve Bank of India (RBI) has introduced guidelines for card networks.
According to the RBI’s directives, authorized card networks collaborate with both banking and non-banking entities to issue credit cards. The selection of the card network for a customer’s card is at the discretion of the card issuer, whether it be a bank or a non-bank institution. This determination is influenced by contractual agreements between the issuers and the card networks.
Upon examination, the RBI noted that specific agreements between card networks and issuers were constraining customer options. Therefore, exercising its authority under the Payment and Settlement Systems Act, 2007, the RBI has issued directives:
a) Card issuers are barred from entering into agreements with card networks that restrict their capacity to utilize services from other card networks.
b) Card issuers are mandated to provide eligible customers the opportunity to choose from various card networks when acquiring a card.
c) Current cardholders should be presented with this choice during their next renewal process.
The directive specifies the authorized card networks, comprising American Express Banking Corp., Diners Club International Ltd., MasterCard Asia/Pacific Pte. Ltd., National Payments Corporation of India–Rupay, and Visa Worldwide Pte. Limited.
The RBI emphasized that both card issuers and networks are obligated to comply with these regulations within current agreements, upon amendment or renewal, as well as in new agreements.
However, the RBI clarified that these directives do not apply to credit card issuers with fewer than 10 lakh active cards.
Furthermore, issuers that issue credit cards through their own authorized card network are exempt from the circular’s applicability.
The directive regarding customer choice during issuance is scheduled to come into effect six months from March 6, 2024.