Introduction: The Reserve Bank of India (RBI) has recently issued a directive, dated March 06, 2024, addressing arrangements between card networks and issuers, specifically related to the issuance of credit cards. This directive aims to enhance customer choice and flexibility by regulating the relationships between card issuers and networks.
Detailed Analysis: The directive focuses on ensuring that card issuers, whether banks or non-banks, do not enter into agreements that restrict them from availing the services of other card networks. This move is motivated by a review that identified certain arrangements limiting choices for customers.
According to the directive, card issuers are now mandated to provide eligible customers with the option to choose from multiple card networks at the time of issuance. For existing cardholders, this option should be offered during the next renewal process.
The directive outlines authorized card networks, including American Express Banking Corp., Diners Club International Ltd., MasterCard Asia/Pacific Pte. Ltd., National Payments Corporation of India–Rupay, and Visa Worldwide Pte. Limited. Card issuers and networks are required to adhere to these regulations in both existing and new agreements.
However, the directive does not apply to credit card issuers with ten lakh or fewer active cards issued. Additionally, card issuers who issue credit cards on their own authorized card network are exempt from the circular’s applicability.
To allow for a smooth transition, the directions outlined in para 3(b) will become effective six months from the date of this circular.
Conclusion: The RBI’s directive marks a significant step in promoting competition and consumer choice in the credit card industry. By prohibiting agreements that limit options, the central bank aims to foster a more dynamic and customer-centric market. The implementation of these regulations is expected to reshape the credit card landscape, providing users with greater flexibility and diverse choices in selecting card networks. As the industry adapts to these changes, stakeholders must ensure timely compliance with the specified timelines to align with the RBI’s vision for a more inclusive and competitive payment system.
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Reserve Bank of India
RBI/2023-24/131
CO.DPSS.POLC.No.S1133/02-14-003/2023-24
March 06, 2024
The Chairman / Managing Director / Chief Executive Officer
Authorised Payment System Providers / Participants (Banks and Non-banks)
Madam / Dear Sir,
Arrangements with Card Networks for issue of Credit Cards
The authorised card networks tie-up with banks / non-banks for issuance of credit cards. The choice of network for a card issued to a customer is decided by the card issuer (bank / non-bank) and is linked to the arrangements that the card issuers have with card networks in terms of their bilateral agreements.
2. On a review, it is observed that some arrangements existing between card networks and card issuers are not conducive to the availability of choice for customers.
3. In exercise of the powers conferred under Section 18 read with Section 10(2) of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007), the RBI being satisfied that it is necessary and expedient, in the interest of payment system and public interest, to do so, hereby, directs as under:
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.
For the purpose of these directions, the following definitions are used:
i. Authorised card networks: American Express Banking Corp., Diners Club International Ltd., MasterCard Asia/ Pacific Pte. Ltd., National Payments Corporation of India–Rupay, and Visa Worldwide Pte. Limited.
4. Card issuers and card networks shall ensure adherence to the above requirements in:
a. existing agreements at the time of amendment or renewal thereof, and
b. fresh agreements executed.
5. The directions at 3(b) above shall not be applicable to credit card issuers with number of active cards issued by them being 10 lakh or less in number.
6. Card issuers who issue credit cards on their own authorised card network are excluded from the applicability of the circular.
7. The directions at para 3(b) above shall be effective six months from the date of this circular.
Yours faithfully,
(Gunveer Singh)
Chief General Manager-in-Charge
