RBI Directive Promoting Customer Choice in Card Networks

Seal of the Reserve Bank of India, symbolizing regulatory authority and oversight in the banking sector
RBI Directive Promoting Customer Choice in Card Networks

In a significant stride towards fostering customer choice and fair competition, the Reserve Bank of India (RBI) has issued directives to card issuers, mandating them not to engage in agreements or arrangements with card networks that restrict customers from accessing services of other networks. This pivotal move aims to ensure customers' freedom to opt for multiple card networks during card issuance or renewal.

Current Landscape and Notable Observations

Currently, the determination of the card issued to a customer lies with the card issuer, be it a bank or non-bank entity. This decision is intertwined with the bilateral agreements between card issuers and card networks. However, the RBI has noticed that certain existing arrangements hinder customer choice, prompting regulatory intervention.

Directives for Card Issuers

In adherence to the new directives, card issuers are barred from entering agreements that inhibit them from utilizing services of other card networks. They are now mandated to offer eligible customers the option to select from various card networks during issuance. Existing cardholders must be provided with this choice at the time of renewal.

Authorized Card Networks

The RBI has enumerated several authorized card networks, including American Express Banking Corp., Diners Club International Limited, MasterCard Asia/Pacific Pte. Limited, National Payments Corporation of India – RuPay, and Visa Worldwide Pte. Limited. Customers are empowered to choose from these networks when acquiring or renewing a card.

Exemptions and Exclusions

The directive allowing users to choose networks does not extend to credit card issuers with ten lakh or fewer active cards. Moreover, card issuers issuing credit cards on their proprietary authorized networks are exempt from this circular.

Impact on the Industry

The RBI's directive is poised to revolutionize the card issuing industry, fostering fair competition among networks and endowing customers with the autonomy to select their preferred network. This initiative is anticipated to stimulate innovation and elevate service quality, as networks vie for customer preference.

Benefits for Customers

The directive will furnish customers with a diverse array of options when selecting a card network, enabling them to make choices based on rewards, cashback offers, acceptance, and other features. Increased competition among card networks is projected to yield enhanced deals and benefits for cardholders.

By adhering to these directives, the RBI aims to fortify consumer rights and nurture a more competitive and customer-centric card industry landscape.

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