RBI directs new guidelines to card issuers and card networks

The Reserve Bank of India has today placed on its website the draft circular on Arrangements with Card Networks for the issue of Debit, Credit, and Prepaid Cards for feedback if any from stakeholders on or before August 4, 2023.

The central bank on a review observed that arrangements existing between card networks and card issuers (banks and non-banks) are not conducive to the availability of choice for customers and accordingly issued the above circular.

“In exercise of the powers conferred under Section 18 read with Section 10(2) of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007), the RBI being satisfied that it is necessary and expedient, in the interest of payment system and public interest, to do so, hereby, directs as under”, the circular said.

The draft circular mandates card issuers (banks / non-banks) to issue cards on more than one card network along with providing customers the facility to choose any one of the network among the multiple card networks. It also restrains card issuers from entering into agreements that limit their ability to tie up with other card networks. This option may be exercised by customers either at the time of issue or at any subsequent time. 

It further said that Card issuers and card networks shall ensure to adhere to the above requirements in existing agreements at the time of amendment or renewal thereof, and fresh agreements executed from the date of this circular  (August 5, 2023).

Card networks and card issuers:

A card network (sometimes called a card association) provides the communication system that issuing banks and businesses use to process credit card transactions. It regulates who, where, and how cards are used.  RuPay®, Visa®, Mastercard®, American Express®, Discover®, China UnionPay®, and JCB®, are examples of card networks.

Card issuers ( issuers of Credit cards, debit cards, and prepaid cards) are financial institutions that provide cards and credit limits to consumers. Issuers manage numerous features of their cards, from the application and approval process to distributing cards, deciding terms and benefits (such as annual fees and rewards), collecting cardholder payments, and more.