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Business News/ Money / Personal Finance/  How this new debit, credit card rule will benefit bank customers — explained
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How this new debit, credit card rule will benefit bank customers — explained

New debit credit card rules: The Reserve Bank of India (RBI) has introduced a draft rule allowing debit, credit, and prepaid card users to choose their preferred card network. This move challenges the current practice of predetermined card network options

New debit credit card rules: RBI proposes customers should have the option to choose a card network (AP)Premium
New debit credit card rules: RBI proposes customers should have the option to choose a card network (AP)

In a pioneering move, The Reserve Bank of India (RBI) has introduced a draft rule that empowers debit, credit, and prepaid card users to select their preferred card network, marking a potentially groundbreaking development worldwide. This rule challenges the existing practice where card network options are predetermined by agreements between issuers and networks

RBI draft proposal on debit, credit cards

According to a draft circular by RBI, card issuers would be prohibited from entering into any arrangement or agreement with card networks that restrain them from availing the services of other card networks.

RBI said it is observed that arrangements existing between card networks and card issuers (banks and non-banks) are not conducive to the availability of choice for customers.

"Card issuers shall provide an option to their eligible customers to choose any one among the multiple card networks. This option may be exercised by customers either at the time of issue or at any subsequent time," as per the draft circular.

What is card network portability?

Card network portability refers to the ability of consumers to transfer their card accounts from one network to another. Just like we can switch our mobile service providers while keeping the same phone number,  card network portability allows cardholders to maintain their existing card accounts, balances, and credit history while switching to a different payment network. 

“This flexibility empowers consumers to choose the network that best suits their needs, whether it's based on factors like rewards programs, acceptance, or customer service. It enhances competition among credit card networks and gives consumers more control over their financial choices," said Amit Gupta, MD, SAG Infotech. 

The central bank has sought stakeholders' comments on the draft circular till August 4.

Ranadurjay Talukdar, Partner and Payments Sector Leader, EY India said that the proposal by RBI is a significant move as it will bring wider choice to consumers, while also ending exclusive issuance arrangements that card networks have with leading issuers. This will provide banks with much-needed encouragement to issue credit cards on UPI, as that is clearly the strongest proposition on the credit side from the Rupay network. On the debit side, the bulk of the issuance volume is currently on Rupay, and most PSUs issue Rupay cards by default. Similarly, on the credit side, several private sector banks, who have an almost exclusive arrangement with either Visa or Mastercard, may now have to expand to offer a Rupay variant," said Ranadurjay Talukdar.

RBI card network portability proposal: Banks may face operational challenges

While this draft holds significant advantages for customers, granting them decision-making authority and portability, banks may face operational challenges and increased costs. “They will need to review existing agreements, establish new partnerships, adjust their customer onboarding processes, plan additional training, and relook at customer profiling. The impact on the manufacturing process of all banking cards is something to be evaluated in the coming few months," said Anadurjay Talukdar.

Banks have less than 90 days to implement these changes

Rajalakshmi Raghu, Head - Strategic Relationships, Manipal Technologies Limited said with the proposed implementation date of October 1st, 2023, banks have less than 90 days to implement these comprehensive organizational changes. 

RBI circular on card network choice: Customers are the real beneficiaries

Customers are the real beneficiaries considering going forward the card issuer has to provide more than one card network and offer the option to choose at the time of issuance or subsequently. “However, the larger benefit to customers other than innovative offers by different network providers is something to check out in the future," added Rajalakshmi Raghu. 

Authorised card networks tie up with banks/ NBFCs for the issuance of cards. MasterCard and Visa are among the most popular networks in India. Other authorised card networks in India include American Express Banking Corp, Diners Club International, and National Payments Corporation of India - Rupay.



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Sangeeta Ojha
A business media enthusiast. Writes on personal finance, business and banking.
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Updated: 08 Jul 2023, 03:02 PM IST
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