Banks seek clarity from RBI on credit cards

Banks seek clarity from RBI on credit cards

Some banks have approached the Reserve Bank of India (RBI) for clarity on guidelines requiring them to offer existing credit card customers a choice of networks such as Rupay, Visa, and MasterCard.

According to the Reserve Bank guidelines issued in March, card issuers must provide this option at the time of issuance and renewals.

A senior bank executive told ET that clarification had been sought on issues such as if choice of networks needs to be offered to all existing customers or only at the time of renewals.

The RBI guidelines will take effect in September 2024.

"Offering such choices during renewals will cause business disruptions, as existing cardholders were given offers based on their customer profiles, co-branding arrangements, and other pricing benefits," he said, adding that one of the suggestions is that these norms should apply prospectively and that any new credit card customer can choose the preferred network.

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Another bank executive said that the matter will be put before the Indian Banks' Association, or IBA, for further discussion.

"While some banks may have informally checked with the regulator, we are going to raise this issue at IBA for further deliberations and come up with a common strategy," he said, adding that while offering credit cards, various bundling of other products is done based on financial models.

"In some cases, there are long-term contracts with co-brand partners, so that also needs to be considered," he said, noting that the fees and other facilities and charges for credit card holders may change depending on those parameters.

In March, the RBI, in a circular, said that it is observed that some arrangements existing between card networks and card issuers are not conducive to the availability of choice for customers. The regulator accordingly directed card issuers not to enter into any arrangement or agreement with card networks that restrains them from availing of the services of other card networks and provides an option to their eligible customers to choose from multiple card networks at the time of issue.

"Already new customers have an option to choose their preferred network. In case a customer is unsatisfied he can choose a different payment network and close the existing account," the above quoted executive said.

The RBI guidelines will be applicable to only those credit card issuers with a number of active cards issued greater than 10 lakh and exempt card issuers who issue credit cards on their own authorised card network.

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