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Credit Card Rules Change: New rules will be active from 6th Sep, Check new rules here!


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The Reserve Bank of India (RBI) has recently issued a directive to card issuers, including banks, regarding their agreements with card networks. The directive aims to prevent exclusive contracts that restrict card issuers from using other networks, thereby promoting consumers’ freedom of choice in selecting card networks.

According to the RBI’s press release dated March 5, 2024, authorized card networks collaborate with banks and non-banks for the issuance of credit cards. The choice of network for a card issued to a customer is determined by the card issuer and is linked to the arrangements between the card issuers and card networks through bilateral agreements.

Key Instructions from the RBI

The RBI has provided specific instructions to card issuers for the benefit of the payment system and public interest. These instructions include:

  1. Restriction on Exclusive Agreements: Card issuers are prohibited from entering into arrangements or agreements with card networks that restrain them from availing the services of other card networks.
  2. Choice of Card Networks: Card issuers must provide eligible customers with the option to choose from multiple card networks at the time of card issuance. For existing cardholders, this option should be provided at the time of the next renewal.

Effective Date and Applicability

The new directive will come into effect six months from the date of the circular, which is September 6, 2024. However, it is important to note that the directive does not apply to credit card issuers with 10 lakh (1 million) or fewer active cards. Additionally, the circular does not apply to card issuers that issue credit cards through their own approved card network.

Definition of Card Networks

The RBI has defined authorized card networks as American Express Banking Corp., Diners Club International Ltd., MasterCard Asia/Pacific Pte. Ltd., National Payments Corporation of India–RuPay, and Visa Worldwide Pte. Limited.

What are Card Networks?

According to the HDFC Bank website, a card network connects banks, merchants, and customers to facilitate secure, smooth, and efficient transactions. Card networks operate in the background when a card is swiped or tapped for payment.

In India, there are currently five authorized card networks: RuPay, Visa, MasterCard, American Express, and Diners Club.

Conclusion

The Reserve Bank of India’s directive aims to promote competition and consumer choice in the credit card market by prohibiting exclusive agreements between card issuers and networks. Card issuers are now required to offer customers the option to choose from multiple card networks, ensuring greater flexibility and freedom of choice for consumers.

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