The Reserve Bank of India (RBI) has issued new guidelines for credit card issuers, aimed at providing more flexibility and options for customers. The central bank has mandated that card issuers must allow their eligible customers to choose from multiple card networks at the time of card issuance or renewal. This will enable customers to access the services offered by different card networks, such as Visa, Mastercard, Rupay, American Express and Diners Club.
Why did RBI introduce this directive?
The RBI observed that some existing arrangements between card networks and card issuers were limiting the choices for customers. Some card issuers had entered into exclusive agreements with certain card networks, which prevented them from offering other card networks to their customers. The RBI said that such arrangements were not conducive to the availability of choice for customers and could also affect the competition and innovation in the card market.
Who will benefit from this directive?
The directive will benefit both customers and card issuers. Customers will have more options to choose from, based on their preferences and needs. They will also be able to avail the benefits and features offered by different card networks, such as rewards, discounts, cashback, security, etc. Card issuers will be able to expand their customer base and offer more value-added services to their customers. They will also be able to leverage the infrastructure and technology of multiple card networks.
What are the implications of this directive?
The directive will have some implications for the card industry. The card issuers will have to make changes in their systems and processes to enable the option of multiple card networks for their customers. They will also have to comply with the operational and regulatory requirements of each card network. The card networks will have to compete more aggressively for acquiring and retaining customers. They will also have to offer more attractive and innovative products and services to differentiate themselves from others.
How will this directive be implemented?
The directive will come into effect from September 6, 2024. The card issuers will have to provide an option to their eligible customers to choose from multiple card networks at the time of card issuance or renewal. The eligible customers are those who have more than 10 lakh active cards issued by them. The card issuers who issue credit cards on their own authorized card networks are exempted from this directive. The card issuers are also prohibited from entering into any agreement with card networks that restricts them from accessing the services of other card networks.
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