The Reserve Bank of India (RBI) vide its notification dated July 5, 2023 issued a draft circular requiring card issuers (both banks and non-banks) to issue cards on multiple card networks and allow customers to choose any one of the available card networks. The objective of the draft circular is to increase options for the customers (to select card networks) and in turn promote a competitive environment in the card network market.
For ease of understanding, a ‘Card Issuer’ refers to a financial institution, such as a bank or a non-bank entity, which is authorized to issue debit, credit, and prepaid cards to customers. A ‘Card Network’, on the other hand, is a financial network that facilitates electronic transactions and enables the issuance, acceptance, and processing of debit, credit, and prepaid cards. The authorized card networks in India are as follows:
- American Express Banking Corp
- Diners Club International Ltd
- MasterCard Asia/ Pacific Pte. Ltd
- National Payments Corporation of India – Rupay
- Visa Worldwide Pte. Limited.
Presently, the selection of a card network for cards to customers is solely determined by the card issuer. This decision is made based on the existing arrangements between the card issuers and card networks (which are established through bilateral arrangements). Upon review, the RBI has observed that the current agreements between card networks and card issuers (both banks and non-banks) do not offer adequate choices for customers. The draft circular proposes to primarily bring in force the following guidelines:
- Card issuers are prohibited from entering into any agreements or arrangements with card networks that restrict them from utilizing the services of other card networks.
- Card issuers are required to provide card options across multiple card networks.
- Card issuers are mandated to offer eligible customers the choice to select one card network among the available multiple options. This choice can be exercised by customers either during the card issuance process or later.
The draft circular has proposed that both card issuers and card networks be required to adhere to the new regulations from October 1, 2023. The RBI has sought inputs on the draft circular from the public until August 4, 2023.