RBI directs card issuers to offer choice of networks to customers

The Reserve Bank of India on Wednesday issued a directive mandating credit card issuers to refrain from engaging in agreements that limit customers' access to services from other card networks, aiming to enhance consumer choice and competition in the market.

"On a review, it is observed that some arrangements existing between card networks and card issuers are not conducive to the availability of choice for customers," the RBI said in a circular.

The central bank highlighted concerns over existing arrangements between card networks and issuers, stressing the importance of ensuring customers' freedom to opt for services across multiple networks. In a circular, the RBI underscored the need for card issuers to offer eligible customers the option to choose from various card networks at the time of issuance.

Under the new guidelines, card issuers are obligated to provide customers with the choice of selecting from different card networks, a decision that was previously predetermined by the issuing bank. This provision extends to both new cardholders and existing customers, with the option being made available during the next renewal cycle.

In India, several card networks, including American Express, Diners Club International, Mastercard, Visa, and domestic provider RuPay, cater to customers. However, the choice of network has traditionally been predetermined by the issuing bank, limiting consumer flexibility.

To ensure adherence to the RBI's directives, card issuers and networks must comply with the guidelines during contract amendments, renewals, and when entering into fresh agreements. The central bank's intervention aims to streamline the process of network selection for customers, shifting from the current practice where customers are required to submit formal requests for network switches.

“Currently, customers are required to send a letter to ask for a switch in card network,” a banker with a private bank told news agency Reuters. “Now, that choice will become mandatory for issuers to offer at the time of issuance and renewal.”

(With Reuters inputs.)