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RBI allows Card Network Portability from Oct 1, 2023

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RBI To Allow Customers To Choose Card Networks Like Visa, Mastercard, And RuPayThe Reserve Bank of India (RBI) has issued a ‘Draft Circular – Arrangements with Card Networks for issue of Debit, Credit and Prepaid Cards’ empowering the debit, credit, and prepaid card users in India with Card network portability w.e.f. October 1st, 2023.

  • This means users can port their card network just like one can port switch/port mobile service providers while retaining the same phone number.
  • The Card network portability will keep their existing card accounts, balances, and credit history intact.
  • The RBI has invited opinions from various stakeholders for the same up to August 4, 2023.

This decision by RBI has been taken in exercise of its powers conferred under Section 18 read with Section 10(2) of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007), by ensuring the interest of payment system and public interest.

What is under the new arrangement?

i.Card issuers are prohibited from making arrangements or agreements with card networks that restrict their ability to utilize the services of other card networks.

ii.Card issuers are required to issue cards on multiple card networks.

iii.Card issuers must offer eligible customers the choice to select any one of the multiple card networks. Customers can exercise this option either during card issuance or at a later time.

The above requirements should be adhered by the Card issuers and card networks during existing agreements at the time of amendment or renewal thereof, and fresh agreements executed from the date of this circular.

Key Points:

i.The Authorised card networks in India are American Express Banking Corp., Diners Club International Ltd., MasterCard Asia/ Pacific Pte. Ltd., National Payments Corporation of India – Rupay, and Visa Worldwide Pte. Limited.

ii.The RBI proposal will make it safer and easier for consumers to access, use and manage credit

iii.This proposed regulation will enhance flexibility and competition in the credit card market, thus, stimulate innovation and drive improvements across the industry.

iv.According to RBI data, credit card outstanding has soared to Rs 2 lakh crore, a rise of 29.7% on a year-on-year (yo-y) basis.

  • Banks have issued 8.65 crore credit cards, as of April 2023.
  • Monthly credit payments are now over Rs one lakh crore every month, with card payments touching Rs 1.32 lakh crore in the month of April 2023.

What is the current scenario?

Debit or credit cards have always featured the logos of Visa, Mastercard, Diners Club, or RuPay. However, individuals have had no control over which card network provider they could choose.  This is because the bank has been choosing the card network provider. But this new mandate by RBI will alter this situation.

Recent Related News:

i.According to RBI Monetary Policy Report (April 2023), credit growth continued to outpace deposit growth in financial year 2022-23 (FY23) at an eleven-year high, despite banks fully transmitting lending rates linked to external benchmarks [250 basis points (bps)], which now account for nearly half of floating-rate loans.

ii.RBI has granted a non-banking financial company (NBFC) licence to the Neobanking platform Jupiter enabling the latter to scale up its lending business.

About Reserve Bank of India (RBI):

i. It was established on April 1, 1935, in accordance with the provisions of the Reserve Bank of India Act, 1934.

ii.The Central Office of the Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937.

iii.Though originally privately owned, since nationalization in 1949, the Reserve Bank is fully owned by the Government of India.

iv.Thus, 2023 marks the 75th year of public ownership of the Reserve Bank and its emergence as a national institution.