Banks and non-banks to seek clarification from RBI on co-branded cards

RBI move aimed end exclusive tie-up with card networks

Card-issuing banks and non-banks are planning to seek clarification from the Reserve Bank of India (RBI) on whether the customers will be given the option to choose a card network in case of co-branded cards.

On Wednesday, the RBI issued draft guidelines proposing that credit, debit, and prepaid card issuers shall provide their eligible customers the option to choose any one among the multiple card networks.

RBI-authorised card networks in India are American Express Banking Corp, Diners Club International, Mastercard Asia/Pacific Pte Ltd, National Payments Corporation of India — RuPay, and Visa Worldwide Pte Ltd.

While card issuers may have arrangements with multiple card networks, a particular co-branded card is issued with one card network. For instance, Axis Bank has a co-branded card with Flipkart which is only available with Visa. Similarly, ICICI Bank’s co-branded card with Amazon is only available with Visa.

“If the customer gets a Flipkart co-branded card, can he/she be given the option to choose from a host of card networks?” asked a senior banker.

One of the main reasons why the RBI wants card issuers to offer multiple card networks is that the regulator wants to end exclusive arrangements.

When Mastercard was barred by the RBI in July 2021 from onboarding new customers for not complying with local storage of data, another card network tapped into card-issuing banks and entered into exclusive tie-ups for five to seven years. After 11 months, in June 2022, the ban on Mastercard was lifted.

According to sources, the regulator was not comfortable with the idea of such exclusive tie-ups.

“The message from the RBI is that the exclusivity should not be there,” informed a top industry source, adding, “There are banks which earlier had tie-ups with one card network.”

Banks like RBL Bank and YES Bank had Mastercard as a partner before the embargo. After the RBI action on Mastercard, these banks entered into agreement with other card networks, including Visa.

“Card issuers shall not enter into any arrangement or agreement with card networks that restrain them from availing of services of other card networks… Card issuers shall issue cards across more than one card network,” said the draft norms.

The norms are proposed to be implemented from October 1. The RBI has said card issuers and card networks should adhere to the new norms with existing agreements at the time of amendment or renewal thereof.

For fresh agreements, the new norms should come into effect from the date of the final circular.

PLAY CARDS RIGHT

* RBI draft norm proposes customers be given choice to select card networks

* Some of the card networks in India are American Express, Mastercard Asia, RuPay, Visa

* Last date for feedback on draft norms August 4

* Proposes norms be effective from October 1

* Card issuers to adhere to new norms while renewing agreements with networks