The Reserve Bank of India (RBI) on Wednesday directed banks and non-banking financial companies (NBFCs) to provide customers the option to choose from multiple networks for credit cards.
The regulator has prohibited card issuers and networks from making any arrangement or agreement that restrains customers from availing the services of other card networks.
“Card issuers shall provide an option to their eligible customers to choose from multiple card networks at the time of issue,” RBI said.
For existing cardholders, this option may be provided at the time of the renewal. The regulator’s directive will be effective six months from September 6.
The RBI-authorised card networks are American Express Banking Corp., Diners Club International Ltd., MasterCard Asia/Pacific Pte. Ltd., National Payments Corporation of India (NPCI)–Rupay, and Visa Worldwide Pte. Limited.
The circular, however, has not clarified if the norms apply to co-branded cards. While a particular bank may offer multiple card networks to their customers, certain co-branded cards are offered only on one platform.
“If you go by the way the circular is written, every card will need to have at least two networks. And the agreement for that particular card may not be restricted to a certain network,” said Sanjeev Moghe President and Head – Cards & Payments.
“Yes, certain cards and co-brands are with a particular network only. Some of these choices are that we make, and in certain cases, it is a decision that has been taken for commercial consideration. I think we will seek some clarification on that,” Moghe said.
The norm will not impact American Express. The circular said: “Card issuers who issue credit cards on their own authorised card network are excluded from the applicability of the circular.”
The norms will be applicable for card issuers with a number of active cards issued by them over 1 million. Twelve issuers – including HDFC Bank, SBI Card, ICICI Bank, Axis Bank – have more than 1 million cards.
The RBI said it found in a review that some arrangements between card networks and issuers are “not conducive to the availability of choice for customers”.
The network for a card issued to a customer is currently decided by the card issuer – based on bilateral agreements.
“The broad intention of the RBI seems to allow Rupay, the domestic card network championed by the NPCI, a fair opportunity to break the dominance of international card networks, which are mainly Visa and Mastercard,” said Shivaji Thapliyal, Head of Research and Lead Analyst, Yes Securities.
“It may be noted that the Rupay is a unique card network since it is the only card network on which the credit card on the UPI facility is available. Hence, the success and ubiquity of Rupay credit cards is linked to and will impact traction for the credit card on UPI facility,” Thapliyal said.
Credit cards are growing at a steady pace in India, with the total number inching towards the 100 million mark. There were 97.9 million outstanding credit cards as of December 2023, with a record addition of 1.9 million in that month, according to data from the RBI. The calendar year 2023 witnessed the addition of 16.71 million cards, a significant increase from the 12.24 million added in 2022.
This trend of growth has been consistent over the past five years, with the number of credit cards in circulation swelling by nearly 77 per cent from 55.53 million in December 2019. This uptick is driven by a combination of sustained push from banks and evolving consumer spending patterns.
First Published: Mar 06 2024 | 12:08 PM IST