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Banks want clarification of the RBI’s credit card network option norms

Submitted by admin on June 29th, 2024

Many financial institutions have asked the Reserve Bank of India to clarify the implementation of guidelines that were issued on March 6 that allow customers to choose multiple card networks for credits cards, said ET.

The Reserve Bank of India’s directive mandates both banks and non banking financial companies to offer this choice with regards to the instrument at the time of launch as well as when it is being underwritten again. It is worthy of note that this directive will commence from September 6, 2024.

Banks, however, are also worried that the application of these guidelines at the renewal point could cause interferences to business continuance plans. Customer offers have been made to existing cardholders according to a number of factors namely, profiling in co-branding, and certain price offers.

These guidelines provide this choice in the first instance of issuance of the credit cards and successive issuance at the time of renewal of the cards. However, banks are still in doubt as to whether this option has to be incorporated to cover all the current customers or simply at the time of renewal.

What has the Reserve Bank of India prescribed regarding the credit card networks?

These guidelines were established to guard customer options and counter long-term closed-shop arrangements between card issuers and networks since the Reserve Bank noted contracts that were not friendly to customer option and compelled the card issuers to stay away from such arrangements.

They usually have to disallow card issuers and networks from making the current contracts they sign with their customers to restrain the usage of other networks.

Card issuers for offering cards also have to offer options to customers to be issued cards under Diners Club International, MasterCard, NPCI-Rupay, and Visa at the time of issuance. For existing customers this might be offered when you are renewing the credit card subscription.

The guidelines apply to card issuers with more than 1 million active credit cards. Major issuers like HDFC Bank, SBI Card, ICICI Bank, and Axis Bank fall under this category. The norms exclude issuers like American Express, which operate on their own authorised networks.