RBI bar New Co-Branded Credit Cards from Federal, South Indian Banks

In a move emphasizing regulatory adherence, the Reserve Bank of India (RBI) has directed Federal Bank and South Indian Bank to cease issuing new co-branded credit cards, potentially impacting over two million prospective customers.expand_more This action, effective March 12, 2024, stems from identified shortcomings in the banks’ compliance with the RBI’s Master Direction on Credit Card and Debit Card issuance.

Both banks have issued official statements confirming the development. While the issuance of new co-branded cards is suspended, existing cardholders, estimated at around 100,000, will continue to enjoy their credit card benefits uninterrupted.

RBI Tightens Oversight of Co-Branded Credit Card Practices

The RBI’s recent directive underscores its commitment to strengthening the regulatory framework for co-branded credit cards in India, a market estimated to be worth over ₹2 trillion (US$24.2 billion) annually. The central bank recently revised its Master Direction to prioritize transparency and enhanced consumer protection within this segment.

A key area of focus is clear disclosure of co-branding partnerships. The amended guidelines mandate that co-branded cards explicitly mention the co-branding arrangement and prominently identify the issuing bank in a minimum font size.expand_more This fosters transparency and empowers consumers to make informed decisions when choosing credit cards.

For instance, imagine you’re considering a new airline co-branded credit card. With the new RBI regulations, the card will prominently display the issuing bank’s name alongside the airline’s branding, in a minimum mandated font size. This allows you to compare interest rates (typically ranging between 14% and 24% depending on the bank), fees, and reward programs offered by different banks before making a well-informed choice.

Federal, South Indian Banks Address Compliance Issues

Federal Bank and South Indian Bank, which collectively hold a combined market share of approximately 5% in the Indian credit card market, have acknowledged the RBI’s directive and are actively working towards rectification.expand_more Both banks are committed to addressing the identified deficiencies and regaining regulatory approval to resume issuing new co-branded credit cards.

This development highlights the RBI’s dedication to fostering a robust and secure credit card market in India. Consumers seeking new co-branded credit cards from these banks should monitor their progress towards achieving regulatory compliance. It’s also worth noting that other banks may be subject to similar scrutiny to ensure adherence to the updated co-branded credit card regulations.

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