New RBI Circular Seeks to Level the Playing Field for Card Networks and Issuers
- ByStartupStory | July 5, 2023
The Reserve Bank of India (RBI) issued a draft circular on Wednesday, presenting new proposals for the relationships between card networks such as Visa, MasterCard, and RuPay, and banks and non-banking financial companies (NBFCs) regarding the issuance of debit, credit, and prepaid cards. The RBI’s announcement of these proposed guidelines came in response to its observation that the current arrangements between card networks and banks/NBFCs, known as “issuers,” were not conducive to providing customers with a wide range of choices.
Traditionally, card networks partner with banks to issue debit, credit, and prepaid cards to customers, with the bank determining the affiliated network (such as American Express, Diners Club, MasterCard, RuPay, or Visa) displayed on the card. Under the draft circular, the RBI proposes that issuers should offer customers the option to select their preferred card network at any time, promoting a fair and equitable environment for all networks. Additionally, the RBI suggests prohibiting exclusive tie-ups between issuers and card networks and allowing issuers to issue cards across multiple networks.
The circular emphasizes that banks, NBFCs, and card networks must comply with these requirements in existing agreements during amendment or renewal, as well as in new agreements executed from the circular’s effective date, starting on October 1, 2023. The RBI has invited comments on the draft circular until August.
Some well-known authorized card networks in India include American Express, Diners Club, MasterCard, RuPay, and Visa. The proposed changes aim to foster greater competition and choice in the card issuance landscape, ultimately benefiting customers and promoting a more inclusive financial ecosystem.
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