Banks ask for clarification from RBI on choice of network guideline

26 Jun 2024 , 06:21 PM

Some banks have petitioned the Reserve Bank of India (RBI) for clarification on the guidelines mandating them to provide existing credit card clients with a choice of networks such as Rupay, Visa, and MasterCard.

According to the Reserve Bank’s March rules, card issuers must disclose this option at the time of issuance and renewal.

A top bank executive told ET that clarification was needed on issues such as whether choice of networks should be offered to all existing customers or only during renewals.

The RBI’s instructions will take effect in September 2024.

“Offering such choices during renewals will cause business disruptions, as existing cardholders were given offers based on their customer profiles, co-branding arrangements, and other pricing benefits,” he said, adding that one suggestion is that these norms be applied prospectively and that any new credit card customer can choose the preferred network.

Another bank executive stated that the topic will be presented to the Indian Banks’ Association, or IBA, for further consideration.

“While some banks may have informally checked with the regulator, we are going to raise this issue at IBA for further deliberations and come up with a common strategy,” he said, adding that while selling credit cards, various bundling of other products is done based on financial models.

“In some cases, there are long-term contracts with co-brand partners, so that also needs to be considered,” he added, adding that credit card fees and other facilities and costs may vary depending on those factors.

In March, the RBI stated in a circular that some arrangements between card networks and card issuers are not conducive to client choice. As a result, the regulator urged card issuers not to enter into any arrangement or agreement with card networks that restricts their ability to use the services of other card networks, and to provide their eligible consumers with the option of selecting among numerous card networks at the time of issue.

“Already, new customers can select their favourite network. If a consumer is dissatisfied, he can switch to a different payment network and close his present account,” the aforementioned executive stated.

The RBI guidelines will only apply to credit card issuers with a total of more than 10 lakh active cards issued, as well as exempt card issuers who issue credit cards through their own authorised card network.

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