CareCredit - Women's Health April 2024

India to Banks: No More Exclusive Credit Card Agreements

Reserve Bank of India

India wants its banks to stop forging exclusive arrangements with credit card networks.

The Reserve Bank of India (RBI) — the country’s central bank and bank regulator — announced the move on its website Wednesday (March 6), saying it had concluded that some of these partnerships do not offer consumers appropriate choice.

“Card issuers shall not enter into any arrangement or agreement with card networks that restrain them from availing the services of other card networks,” the RBI said on its website.

“Card issuers shall provide an option to their eligible customers to choose from multiple card networks at the time of issue. For existing cardholders, this option may be provided at the time of the next renewal.”

The RBI says banks must now give customers the option to choose from multiple card networks when issuing a new card. Existing cardholders can choose their networks at renewal. Card issuers with less than 1 million active cards will not be affected, nor will issuers that have their own authorized card networks.

A report Wednesday by Bloomberg News characterized the RBI’s move as a surprise decision, and says that it may impact Visa and Mastercard the most in India as they levy fees based on their card offerings, including for overseas usage. American Express uses its own network, and could largely be shielded from the rule, the report said.

PYMNTS has contacted Visa for comment but hasn’t yet received a reply.

A spokesperson for Mastercard said the company supports the RBI’s “efforts at enhancing choice for cardholders.”

 

The news comes weeks after a report that Visa and Mastercard had paused intermediated commercial card payments in India after the RBI told the companies to halt domestic transactions for business payment solution providers (BPSPs).

“Visa received a communication from the RBI on February 8, in what appears to be an industry-wide request for information on the role of business payment solution providers in commercial and business payments,” a Visa India spokesperson told Reuters at the time.

The move could be tied to efforts by the RBI to half the flow of money to merchants who have not been subjected to know your customer (KYC) processes.

In related card news, this week saw the U.S. Consumer Financial Protection Bureau (CFPB) issue its final rule lowering credit card late fees, reducing the typical fee from $32 to $8.