RBI’s new guidelines on credit cards could help customers: Explained

The RBI has instructed credit card issuers to offer customers a choice of multiple card networks. The regulator has prohibited card issuers from entering into any exclusive deals with a card network for the issuance of credit cards. The move is advantageous for customers as they will have the liberty to choose from multiple card networks.

What does the announcement mean?

The RBI has directed banks and non-banks that issue credit cards not to enter into any contract or agreement with card networks that prevent them from using the services of other card networks.

The card issuers should offer a choice of multiple card networks to their eligible customers at the time of issue, it said. The regulator has given a deadline of six months to card issuers to comply with the new norms.

Why have new guidelines been issued?

There are five authorised card networks in India: American Express Banking Corp, Diners Club International Ltd, MasterCard Asia/ Pacific Pte Ltd, National Payments Corporation of India–Rupay, and Visa Worldwide Pte Ltd.

These authorised card networks partner with banks or non-banks (card issuers) for the issuance of credit cards. The selection of network for a card issued to a customer is made by the card issuer and is based on the agreements that the card issuers have with card networks in terms of their bilateral agreements.

After an assessment, the RBI found that some of these agreements existing between card networks and card issuers are not favourable to the availability of choice for customers.

In July last year, the central bank issued a draft circular on arrangements with card networks for the issuance of debit, credit and prepaid cards. However, on March 6, the regulator issued the final norms on arrangements with card networks for the issuance of credit cards.

How will the new norms help customers?

The RBI also said that card issuers such as American Express, who issue credit cards on their own authorised card network, are exempted from the new norms.

What is the total number of credit cards in India?

The number of outstanding credit cards at the end of January 31, 2024, was 9.95 crore, as per the RBI’s latest data. Some of the leading credit card issuers include HDFC Bank (2.01 crore), SBI Cards (1.86 crore), ICICI Bank (1.68 crore) and Axis Bank (1.37 crore).

With the new guidelines in effect, eligible customers will get to select one among the multiple card networks. Banks and non-banks will not be able to coerce customers to take credit cards issued by a specific card network with whom they have any tie-ups. The move will increase competition among card networks as they will have to issue cards with appealing features.

What happens to existing credit card customers?

The RBI said for existing cardholders, the choice of the card network should be offered at the time of the next renewal of the credit card.

Is there any exclusion?

The regulator said the new guidelines are not applicable to credit card issuers with the number of active cards issued by them being 10 lakh or less in number.