India cenbank asks card issuers to give users choice of selecting network

By Siddhi Nayak and Jaspreet Kalra

MUMBAI (Reuters) -India's central bank on Wednesday said issuers of credit cards cannot enter into any arrangement or agreement with card networks that restrain customers from availing the services of other networks.

"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 Reserve Bank of India (RBI) said in a circular.

Issuers will have to provide an option to customers to choose from multiple networks at the time of the card's issuance, the RBI said.

The change has been made solely to enhance customer choice, a source familiar with the central bank's thinking, said.

For existing cardholders, the option would have to be provided at the time of the next renewal, the RBI said.

The requirement to offer customers a choice of card networks will become mandatory six months from March 6, the RBI added.

Issuers with less than 1 million active credit cards are exempted from the requirement, while those who issue cards on their own authorised network are also excluded.

Networks of American Express, Diners Club International, Mastercard, Visa and homegrown RuPay provide services to customers in India, but the provider is usually determined by the bank depending on the card issued.

"We have seen the latest RBI circular on arrangements with multiple card networks for issuance of credit cards. We support the regulator’s efforts at enhancing choice for cardholders," Mastercard said in an emailed statement.

Visa and Rupay did not immediately respond to requests for comment.

The regulatory change is likely to negatively impact large partnerships, where both the issuer and the network contributed towards rewards or incentives offered to customers, an executive with a card network said.

The source and others cited in the report declined to be named as they are not authorised to speak to the media.

"Currently, customers are required to send a letter to ask for a switch in card network," a banker with a private bank said.

"Now, that choice will become mandatory for issuers to offer at the time of issuance and renewal."

(Reporting by Siddhi Nayak and Jaspreet Kalra in Mumbai; Editing by Sohini Goswami and Mrigank Dhaniwala)