The Reserve Bank of India (RBI) on March 6, 2024, said card issuers should not enter into any arrangement with card networks that restrain them from availing the services of other card networks. The card issuers should provide an option to their eligible customers to choose from multiple card networks at the time of issue, the RBI said. For the existing cardholders, this option may be provided at the time of the next renewal, the RBI added. These rules are effective six months from the date of this circular.
Banks operate debit cards and credit cards issued to customers through a particular payment network. The authorised card networks in India include American Express Banking Corp., Diners Club International Ltd., MasterCard Asia/ Pacific Pte. Ltd., National Payments Corporation of India–Rupay, and Visa Worldwide Pte. Limited.
"The authorised card networks tie up with banks / non-banks for issuance of credit cards. The choice of network for a 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," RBI said.
RBI made this move as it observed that some arrangements existing between card networks and card issuers are not conducive to the availability of choice for customers.
Card issuers and card networks shall ensure adherence to the above requirements in existing agreements at the time of amendment or renewal thereof, and fresh agreements executed, RBI mandated.
The RBI said card issuers and card networks need to ensure the new rules are implemented in existing agreements at the time of amendment or renewal by executing fresh agreements, the RBI said.
However, the RBI clarified that the above-mentioned directions do not apply to credit card issuers if the number of active cards issued by them is 10 lakh or less in number. Also, card issuers who issue credit cards on their own authorised card network are excluded from the applicability of the circular, the RBI added.
The directive grants customers the freedom to choose their preferred card network during new card issuance or those issued earlier. This allows customers to choose a network choice that aligns with their needs, with options, for instance, RuPay offering lower transaction fees as it is an indigenously developed network.
Banks used to make network decisions based on factors like global acceptance and customer incentives like airport lounge access etc. Now, customers can select networks that suit them, for instance, if they want to use UPI applications for credit card payments, they can choose RuPay as it is the only network that allows the facility. UPI payments exempt merchants from processing fees over traditional card payments so they prefer it.
