RBL Bank enters into agreement with Visa for issuing credit cards

Private sector lender RBL Bank on Thursday said it entered into an agreement with global card player Visa yesterday to issue credit cards enabled on the Visa payment network. 

The bank is expecting to start issuing credit cards on the Visa payment network post the technology integration, which is expected to take 8 to 10 weeks. 

Hence, it has conveyed that in the interim, the banks’ run rate of issuing 100,000 new credit cards per month would be impacted until there is some clarity from the Reserve Bank of India (RBI), on issuing new credit cards on the Mastercard network or till the technical integration with Visa is complete. 

RBL Bank had a tie-up with Mastercard for issuing credit cards. But, the Reserve Bank of India (RBI) banned Mastercard from onboarding new customers on its network from July 22 over non-compliance with local data storage guidelines. 

In an exchange notification, RBL Bank said, “We await further information from Mastercard on RBI’s supervisory action”.

While RBL Bank currently issues credit cards on the Mastercard network only, its debit and prepaid cards are already enabled on other payment networks in addition to the Mastercard network. 

RBI's deision to bar Mastercard from onboarding new customers makes it the third card player to be barred on grounds of non-compliance with local data storage norms after the RBI had in April told American Express and Diners Club International not to get new domestic customers. 

Mastercard in a statement late last night said, “We are fully committed to our legal and regulatory obligations in the markets we operate in. Since the issuance of the RBI directive requiring on-soil storage of domestic payment transaction data in 2018, we have provided consistent updates and reports regarding our activities and compliance with the required stipulations.” 

“While we are disappointed with the stance taken by the RBI in their communication dated July 14, we will continue to work with them to provide any additional details required to resolve their concerns. Building on our considerable and continued investments in India, we remain committed to working with our customers and partners in advancing on the government’s Digital India vision,” Mastercard said.

Mastercard is a payment system company, operating a card network in the country under the PSS Act. Along with Mastercard, Visa, and RuPay are the other big card issuers in the country. Visa is the largest player in the space followed by Mastercard and RuPay, according to industry estimates. But Mastercard is seen as having a premium position in the industry. RuPay, which accounts for nearly 35 per cent of the cards market share, is seen as a disruptor, fast catching up with its global peers. While Visa and Mastercard are big players in the credit cards segment, RuPay has cornered a large chunk of the debit cards segment. 

RBI action may hamper the issuance of cards in the near term for private banks which have exclusive tie-ups with Mastercard for promoting spending. There could also be a small hit on other income as no incremental cards can be issued. Banks are taking stock of the situation and preparing responses.

Public sector banks, on the other hand, will not be impacted as they are increasingly issuing cards on the RuPay network, India’s homegrown indigenous card payment network.