New RBI directions expand customer options in credit card network selection

financialexpress.com:

The Reserve Bank of India (RBI) has issued guidelines to enhance customer options and flexibility in credit card issuance by card networks.

As per RBI guidelines, authorized card networks work with both banks and non-bank entities to issue credit cards. The choice of which network is used for a customer’s card is determined by the card issuer, whether it’s a bank or a non-bank institution. This decision is influenced by agreements between the issuers and the card networks.

After reviewing the situation, the RBI observed that certain agreements between card networks and issuers were restricting customer choices. Consequently, utilizing its authority granted under the Payment and Settlement Systems Act, 2007, the RBI has issued directives:

a) Card issuers are prohibited from making agreements with card networks that limit their ability to utilize services from other card networks.

b) Card issuers must offer eligible customers the choice to select from multiple card networks when obtaining a card.
© Existing cardholders should have this option available during their next renewal.

The directive outlines authorized card networks, which include 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 stipulated that both card issuers and networks are obliged to adhere to these requirements within existing agreements, upon amendment or renewal, as well as in new agreements.

However, it clarified that these directions do not extend to credit card issuers with fewer than 10 lakh active cards.

Issuers who issue credit cards through their own authorized card network are exempt from the circular’s