why the Reserve Bank of India (RBI) is cracking down on co-branded credit cards in just six reasons. From privacy concerns to impacts on B2B payments, find out how recent directives aim to safeguard consumers and maintain a secure credit card environment.
Why is RBI taking action against co-branded credit cards?
There are mainly 6 Reason.
- Regulatory Vigilance
- Data Privacy Concerns
- Selective Approval Process
- Transparency Mandate
- Network Diversity
- Impact on B2B Payments
The Reserve Bank of India (RBI) is taking a closer look at co-branded credit cards to ensure they operate within a regulated framework.
The increased scrutiny comes amid concerns about data sharing between co-branding partners, with the RBI emphasizing that brands should stick to being sourcing or marketing channels, rather than providing unregulated entities access to the tightly controlled credit card industry.
To reinforce regulatory measures, the RBI issued directives on March 7, requiring co-branded card issuers to prominently display the name of the issuing bank.
Co-branding partners are now prohibited from accessing any transaction information of the cardholder.
In a move to enhance customer choices, the RBI also barred banks from entering into exclusive agreements with card networks like Visa, American Express, and Mastercard, promoting a more diversified card network landscape.
This crackdown extends to non-banking finance companies (NBFCs) seeking approval to issue credit cards, a privilege granted to only a select few banks by the RBI. The recent directives aim to maintain a regulated and secure environment within the credit card sector.
The RBI’s restrictions on business and commercial payments made through credit cards, which accounted for nearly 20% of total credit card spending, have significant implications for B2B vendor payments, with a monthly total of Rs 30,000 crore being impacted.
Overall, the RBI’s actions underscore its commitment to preserving the integrity of the credit card industry and protecting consumers from potential risks associated with unregulated practices.
What steps should I take if I have a co-branded credit card
If you have a co-branded credit card, here are some steps you can take:
1. Review the Changes: Understand the recent changes and directives issued by the Reserve Bank of India (RBI) regarding co-branded cards. Familiarize yourself with the new rules and guidelines.
2. Check Issuing Bank: Identify the issuing bank of your co-branded credit card. The name of the issuing bank should now be prominently displayed on the card, as per the RBI’s directive.
3. Data Privacy: Be aware that co-branding partners are no longer allowed to access any transaction information of the cardholder. This is to protect your data privacy.
4. Multiple Card Networks: If your co-branded card is tied to a specific card network (such as Visa, American Express, or Mastercard), consider exploring other options. The RBI has prohibited banks from entering into exclusive agreements with card networks, so you have the freedom to choose from multiple networks.
5. Contact Customer Service: If you have any specific concerns or questions related to your co-branded credit card, reach out to the customer service of the issuing bank. They can provide personalized guidance based on your card details.
