Banks Must Allow Multi-Network Card Selection: RBI

The Reserve Bank of India (RBI) has issued a circular on March 6, 2024, directing banks and non-banking financial companies (NBFCs) to provide their eligible customers with an option to choose from multiple card networks at the time of issuing credit or debit cards . This move is aimed at enhancing customer choice and promoting competition among card networks.

What are card networks?

Card networks are the entities that facilitate the processing of electronic payments between cardholders, merchants, and card issuers. They provide the infrastructure, technology, and rules for payment transactions. Some of the authorised card networks in India are American Express, Diners Club, MasterCard, Visa, and National Payments Corporation of India (NPCI) for RuPay.

Why did RBI issue this directive?

RBI said that it observed that some arrangements existing between card networks and card issuers are “not conducive to the availability of choice for customers”. It also said that card issuers shall not enter into any arrangement or agreement with card networks that restrain them from availing the services of other card networks. This implies that some card issuers may have exclusive or preferential deals with certain card networks, which may limit the options for customers.

How will this benefit customers?

By providing customers with an option to choose from multiple card networks, RBI aims to empower them to select the network that best suits their needs and preferences. Customers may benefit from different features, benefits, fees, and charges offered by different card networks. For example, some card networks may offer lower transaction fees, higher reward points, better security features, or wider acceptance than others. Customers may also switch to another network if they are dissatisfied with their current one.

When will this be effective?

The RBI’s directive will be effective from September 6, 2024, six months from the date of the circular. For the existing cardholders, this option may be provided at the time of the next renewal. However, this directive will not be applicable to credit card issuers with number of active cards issued by them being 10 lakh or less in number. Card issuers who issue credit cards on their own authorised card network are also excluded from the applicability of the circular.

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