No new co-branded credit cards: RBI directive to 2 banks
The Reserve Bank of India has asked Federal Bank and South Indian Bank (RBI) to stop issuing new co-branded credit cards, marking a step towards increased regulatory scrutiny.
In a stock exchange filing on Wednesday, Federal Bank said it is rectifying the deficiencies, and will await regulatory approval before issuing new cards. Nevertheless, the bank will continue offering credit cards to both new and existing customers in the non-cobranded segment.
Likewise, South Indian Bank also informed the stock exchanges that it will not enrol new customers for its co-branded products till regulatory requirements are complied with.
Both banks also clarified that they will continue to serve existing customers with co-branded credit cards.
Co-branded credit cards have witnessed significant growth in recent years, with most banks entering into arrangements with merchants and fintech companies. As of January, the number of credit cards in circulation reached 99 million, up from 97.9 million in December.
On 7 March, RBI revised the master direction on credit and debit cards, simplifying the process for non-bank financial companies and banks to become co-branded partners of card issuers without prior approval.
Additionally, RBI said that for cardholder convenience, transaction data may be securely retrieved from a card issuer’s system in an encrypted form and displayed on a co-branding partner’s platform.
In another circular on 6 March, RBI prohibited banks from entering exclusive arrangements with card networks such as Visa, American Express and Mastercard, to ensure customers have access to multiple card network options.
Federal Bank and South Indian Bank clarified that they will continue to serve existing co-branded credit cards customers