RBI Enhances Flexibility in Credit and Debit Card Network Selection

Overview

The Reserve Bank of India (RBI) has revised the ‘Master Direction – Credit Card and Debit Card – Issuance and Conduct Directions, 2022’, effective from March 7, 2024. This amendment is designed to promote consumer choice and prevent restrictive practices in card network partnerships.

Key Amendments and Their Implications

1. Non-Exclusive Partnerships:
   • Card Network Freedom: Card issuers are now prohibited from entering exclusive arrangements with specific card networks. This change ensures that issuers can offer services across multiple networks, providing customers with a broader range of options.
2. Scope of Application:
   • Credit Cards: The directions apply to all banks and Non-Banking Financial Companies (NBFCs) that issue credit cards, except those with fewer than 10 lakh active cards and those like American Express who operate their own network.
   • Debit Cards: All banks operating in India must comply with these directions for debit cards.
3. Consumer Choice at Forefront:
   • Multiple Network Options: Issuers must allow eligible customers to choose from multiple card networks at the issuance and next renewal stages, enhancing customer autonomy in selecting their preferred network.
4. Operational and Compliance Details:
   • Compliance Timeline: Card issuers have a 6-month period to align their operations with the new norms.
   • Penalties for Non-Compliance: Failure to close accounts within seven working days when there is no outstanding balance will incur a penalty of Rs 500 per calendar day of delay, payable to the cardholder.
5. Financial Conduct:
   • Interest Calculations: Interest will only be charged on the outstanding amount of the bill after adjusting for any payments, refunds, or reversed transactions.
   • Authorized Payment Modes: Card issuers are required to clearly list authorized payment modes on their websites and billing statements.
   • Corporate Cards: Conditions for business credit cards, where liability rests with the corporate entity, are subject to agreements between the card-issuer and the principal account holder.

Regulatory Context

• Authorized Networks: The list of RBI-authorized card networks includes American Express, Diners Club, MasterCard, NPCI–Rupay, and Visa.
• Vision for Portability: These changes align with RBI’s goal to introduce credit card portability, allowing consumers to switch products and services more freely among providers.

Industry Impact

• Credit Card Statistics as of January 2024:
  • Total credit cards in circulation stood at approximately 9.95 crore.
  • Leading issuers include HDFC Bank (2.01 crore), SBI Cards (1.86 crore), ICICI Bank (1.68 crore), and Axis Bank (1.37 crore).
  • HDFC Bank and SBI are also the principal debit card issuers.

Repealed Directives

This revision supersedes several past directives related to co-branded credit cards and credit card issuance by Scheduled Urban Cooperative Banks, streamlining the regulatory framework under a unified directive.

These strategic updates by the RBI are intended to enhance competitive practices in the card issuance industry and empower consumers with greater flexibility and control over their financial products. This move is a step forward in making the financial services sector more inclusive and customer-friendly.