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Exclusive deals between issuers and networks are now officially prohibited in India’s credit card market, as regulators look to reduce the dominance of Visa and Mastercard.
New rules that require credit card issuers to offer their customers a choice of network are now live in India, following a six-month preparation window.
On Friday (September 6), a Reserve Bank of India (RBI) circular from March this year came into effect, forcing credit card issuers to offer customers a choice of network.
The circular states: “Card issuers shall not enter into any arrangement or agreement with card networks that restrain them from availing the services of other card networks.”
It adds that card issuers shall provide an option to customers to choose from “multiple” card networks at the time of issuance.
For existing cardholders, this option may be provided at the time of the next renewal.
The rules apply to both bank and non-bank issuers of credit cards, and will apply to all authorised credit card networks.
In addition to Visa and Mastercard, the other networks that come under the regulation are American Express, Diners Club International and RuPay, India’s low-cost domestic network.
The only exemptions are for issuers that have fewer than 1m cards in circulation, and in cases where an issuer offers a card on its own network.
Consumer choice
Issuers including Yes Bank and Bank of Baroda have already implemented the required changes, allowing customers to select their preferred network during the credit card application process.
The RBI said the rules were developed following a regulatory review which found that exclusive issuer-network arrangements undermine competition and consumer choice.
“It is observed that some arrangements existing between card networks and card issuers are not conducive to the availability of choice for customers,” said the RBI.
In July last year, the review led the RBI to publish a draft circular designed to prohibit these arrangements.
The draft circular also applied to debit cards and prepaid cards, indicating that issuers of these cards are likely to come under similar or identical rules in future.
