RBI issues orders to credit card issuers to promote customer choice
The Reserve Bank of India has instructed credit card issuers to refrain from entering into agreements that limit customers' access to services provided by other card networks. This directive aims to enhance consumer choice and competition in the credit card industry
FollowThe Reserve Bank of India (RBI) has issued directives to credit card issuers on Wednesday that are aimed at enhancing consumer choice and fostering competition in the credit card industry. The central bank instructed that credit card issuers must refrain from entering into any agreements with card networks that limit customers' access to services provided by other card networks.
The RBI's decision came following its observation of certain arrangements between card networks and card issuers that were found to restrict customers' options. Presently, authorized card networks collaborate with banks and non-bank entities for credit card issuance. The choice of card network for a customer's credit card is typically determined by the card issuer and is influenced by the bilateral agreements between the card issuers and card networks.
Authorized card networks encompass entities such 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.
Furthermore, the RBI mandated that card issuers must offer eligible customers the opportunity to select from multiple card networks when obtaining a new credit card. For existing cardholders, this choice should be provided at the time of card renewal, with the directive set to be effective six months from the announcement date.
In its statement, the RBI emphasized the importance of adherence to these requirements in existing agreements, especially during amendments or renewals, as well as in new agreements.
However, the central bank clarified that certain exemptions apply to credit card issuers with a relatively smaller number of active cards, specifically those with 10 lakh or fewer issued cards. Additionally, credit card issuers operating on their own authorized card networks are excluded from the scope of the RBI's latest circular.
The RBI's directive aims to promote fair competition and empower consumers with greater flexibility and choice in the credit card market, aligning with broader efforts to enhance consumer protection and market transparency in the financial sector.
