The Reserve Bank of India (RBI) on Wednesday issued instructions to banks to allow customers to choose from multiple card networks.

The instructions do not apply to card issuers that issue credit cards through their own authorized card networks. Further, the instructions do not apply to credit card issuers whose number of active cards issued by them is 10 lakh or less. The instructions will come into force from September 6, 2024.

“The authorized card networks work with banks/non-banks to issue credit cards. The choice of network for a card issued to a customer is decided by the card issuer (bank/non-bank) and is linked to the relevant agreements that card issuers have with card networks in terms of their bilateral agreements,” an RBI statement said.

The decision was taken after the apex bank found that some agreements “between card networks and card issuers do not contribute to providing choice to customers.”

Under the new guidelines, card issuers will not be allowed to enter into agreements or agreements with card networks that prevent them from using the services of other card networks. Additionally, the apex bank states that card issuers should provide their eligible customers with the option to choose between multiple card networks at the time of issuance. “For existing cardholders, this option may be made available at the time of next renewal,” RBI said.

The instructions apply to authorized card networks such as American Express Banking Corp, Diners Club International Ltd, MasterCard Asia Pacific Pte Ltd, National Payments Corporation of India-Rupay and Visa Worldwide Pte Limited.

Notably, the apex bank sought feedback from various stakeholders on the same in a draft circular in July 2023. The apex bank has also mandated card issuers (banks/non-banks) to issue cards through more than one card network and given customers the option to choose one from multiple card networks. It also prevented card issuers from entering into agreements that limit their ability to work with other card networks.

Notably, the apex bank on Tuesday ordered mortgage lender JM Financial Products Ltd (JMFPL) to stop and desist from any form of equity and debenture financing, including sanctioning and disbursing loans through an initial public offering (IPO). ) of shares and against subscription to bonds. The banking regulator said that “apart from the violation of regulatory guidelines,” there are serious concerns about governance issues at JM Financial Products that are detrimental to the interests of customers.

According to the banking regulator, the action is necessary due to certain serious deficiencies found in loans approved by the company for IPO financing as well as in the subscription of NCDs (non-convertible debentures).