Credit card rule change: Banks must offer customers a choice of credit card network, says RBI

The Reserve Bank of India has directed credit card issuers like banks and Non-banking financial companies (NBFC) to not sign any exclusive contracts with card networks that ‘restrain’ them from using other networks. This comes after a review determined that some card networks and issuer agreements did not support consumers' freedom of choice.

“The authorised card networks tie-up with banks / non-banks for issuance of credit cards. The choice of network for a card issued to a customer is decided by the card issuer (bank / non-bank) and is linked to the arrangements that the card issuers have with card networks in terms of their bilateral agreements”, said RBI press release dated 5 March.

Through this directive, customers will now have the option to choose from multiple networks. Credit card networks create virtual payment infrastructures in which merchants can receive their payments. Networks then charge the merchant an interchange fee (or swipe fee) for processing a consumer transaction.

Also Read: RBI prohibits Visa, Mastercard from commercial card transactions

Authorised card networks in India include MasterCard, Visa, National Payments Corporation of India for RuPay, American Express, and Diners Club

Credit card rules change

The regulator's directive which will be effective from September 6 also mentioned that the existing cardholders may be given the option at the time of their next renewal.

The RBI also stated, “Card issuers and card networks shall ensure adherence to the above requirements in: existing agreements at the time of amendment or renewal thereof, and fresh agreements executed.”

However this directive will not be applicable to credit card issuers whose tally of active cards is one million or less. Card issuers with their own authorised network are excluded too.

The network for a card issued to a customer is currently decided by the card issuer – based on bilateral agreements.