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Whenever you apply for a bank card, you usually don't get to choose the network provider. But this is set to change with the RBI issuing a draft circular on 5th July 2023. From 1st October 2023, customers will get a choice to choose the network provider for their card.
The current process
Whenever you apply for a bank credit, debit, or prepaid card, you mostly don’t get to choose the card network. It usually happens as the bank may have an exclusive arrangement with a card network like Visa, Mastercard, etc. So, the bank issues the card on their network. Currently, there are 5 card networks in India. These include:
- RuPay
- Visa
- Mastercard
- American Express
- Diners Club International
The RBI wants to change the above process. They want banks to offer cards on multiple card networks and give the customer a choice to select the card network.
RBI draft circular on card network arrangements for the issue of cards
The RBI has issued a draft circular on card network arrangements that banks and non-banks have with card networks for the issue of debit, credit, and prepaid cards. The RBI has invited comments on the draft circular by 5th August 2023. The circular mentions the following three points:
No exclusive agreements: The bank shall not enter into any exclusive arrangement or agreement with the card network(s). Such agreements are not conducive to the availability of choice for customers. They restrain the bank from availing the service of other card networks.
Card issuance across multiple networks: The RBI wants banks to issue cards across more than one card network.
The customer can choose the card network: Finally, the customer should get the option of selecting from the multiple card networks. The customer may choose the card network either at the time of card issue or any time later. For example, if a card has been issued to you on the Visa network, you will have the option to switch to another network of choice like RuPay, Mastercard, etc. It is similar to porting a mobile number across various service providers.
The RBI has proposed to give customers the choice of card network from 1st October 2023. The RBI has invited comments on the draft circular. Currently, Visa and Mastercard have a majority share in the card network space in India. The RBI move will break the exclusivity arrangement and give space to other networks like RuPay to grow.
The interchange fee or MDR on Rupay credit cards is low. As the revenue earned is low, some banks don’t prefer to issue credit cards on the RuPay network. However, the RBI move will let the customer choose the network. So, if a customer wants, the banks will have to issue the card on RuPay or any other network of their choice.
Customer-friendly move to put control in the customer’s hand
The RBI draft circular aims to break the exclusivity agreements between banks and card networks. Banks will have to issue cards across multiple networks. The customer will have the choice to select the network either at the time of card issuance or any time later. It is one of the many customer-friendly initiatives that the RBI has taken to put the customer first.
Gopal Gidwani is a freelance personal finance content writer with 15+ years of experience. He can be reached at LinkedIn.