RBI’s New Rules: RBI’s recent regulations are set to revolutionize the credit card industry by offering consumers more options. The directive mandates that credit card issuers allow eligible customers to choose from various card networks, breaking away from restrictive agreements that limit their choices. This move, outlined in a circular, aims to address concerns about limited options and unfair competition in the industry.
Key points of the RBI’s New Rules include:
- Compulsory Choice: Issuers must offer eligible customers the chance to pick from multiple card networks when applying for or renewing credit cards.
- Prohibition of Restrictive Agreements: Card issuers are barred from engaging in agreements with card networks that prevent them from utilizing services from other networks.
- Timeline for Implementation: The directive will be enforced six months after its issuance, allowing issuers and networks time to comply.
- Exceptions: Lastly, credit card issuers with a smaller customer base (less than 1 million active cards) and those issuing cards on their proprietary networks are exempted.
However, this measure is anticipated to empower consumers, offering them more control and flexibility over their financial products while fostering fair competition and preventing anti-competitive practices.
Previously, customers had to request a switch in card networks through a letter, but now, issuers are obligated to provide this choice during issuance and renewal.
However, concerns have been raised by a card network executive, who worries about the impact on partnerships where both issuer and network contribute towards customer rewards or incentives. Despite this, the RBI’s directive reaffirms its commitment to transparency, choice, and competition in the financial sector, aiming to create a more consumer-friendly environment. As the deadline for implementation approaches, issuers and networks will need to adjust their practices accordingly to comply with the new regulations.
