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Agreements with Card Networks for Issuance of Credit Cards

On March 6, 2024, the Reserve Bank of India (RBI) issued directives aimed at enhancing customer choice and flexibility in credit card issuance to banks and non-banks.

The RBI identified that certain agreements between card networks and card issuers were not conducive to promoting customer choice. This prompted the RBI to revise these agreements between the lenders and card networks.

Key directives include:

  • Prohibition of Limiting Agreements: Card issuers are prohibited from entering agreements with card networks that restrict their ability to use services provided by other card networks.
  • Offering Choice to Customers: Card issuers must provide eligible customers with the option to select from multiple card networks when receiving their cards. Current cardholders may be offered this choice during the next renewal process. This shall be effective six months from the date of the circular. This direction is not mandatory for credit card issuers with 10 lakh or less active cards.
  • Exemption: These directives shall not apply to card issuers who issue credit cards on their own authorised card network.

With the new directions in place, eligible users will be able to select one of the several card networks. Banks and non-banks will be unable to force clients to use credit cards issued by a certain card network with which they have a tie-up. This move will increase competition among card networks by requiring them to issue cards with enticing features.

The RBI has set a six-month timeline for card issuers to comply with the new regulations, signaling a swift transition towards increased customer choice and competition in the credit card market.