RBI Directs Card Issuers to Provide Multiple Network Options

March 7, 2024

In a significant move to promote customer choice and fair competition, the Reserve Bank of India (RBI) has issued directions to card issuers, instructing them not to enter into any arrangement or agreement with card networks that restrain them from availing the services of other card networks. This directive aims to ensure that customers have the freedom to choose from multiple card networks at the time of card issuance or renewal.

Current Scenario and Observations

Presently, the 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. However, the RBI has observed that some existing arrangements between card networks and card issuers are not conducive to the availability of choice for customers, prompting the central bank to take action.

Directive for Card Issuers

Under the new directive, card issuers are prohibited from entering into any arrangement or agreement with card networks that restrains them from availing the services of other card networks. Card issuers are now required to provide an option to their eligible customers to choose from multiple card networks at the time of issue. For existing cardholders, this option needs to be provided at the time of the next renewal.

Authorized Card Networks

The RBI has identified 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. These networks will be available for customers to choose from when obtaining a new card or renewing an existing one.

Exemptions and Exclusions

The direction on allowing users to pick the network shall not be applicable to credit card issuers with a number of active cards issued by them being 10 lakh or less. Additionally, card issuers who issue credit cards on their own authorized card network are excluded from the applicability of the circular.

Impact on the Industry

The RBI’s directive is expected to have a significant impact on the card issuing industry, promoting fair competition among card networks and empowering customers with the freedom to choose their preferred network. This move is likely to encourage innovation and improve the quality of services offered by card networks, as they will now have to compete for customer preference.

Benefits for Customers

The new directive will provide customers with a wider range of options when selecting a card network, allowing them to choose based on factors such as rewards, cashback offers, acceptance, and other features. This increased competition among card networks is expected to result in better deals and benefits for cardholders.

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