Major Banks Halt Co-Branded Credit Cards! Find Out Why RBI’s New Rules Are Shaking Up the Banking Industry!

Federal Bank, in response to regulatory guidance from the Reserve Bank of India (RBI) dated March 12, has taken measures regarding co-branded credit cards. The bank has ceased issuing new co-branded credit cards and is actively addressing areas of deficiency outlined in the regulatory guidelines. Prior to resuming issuance, Federal Bank will seek regulatory clearance.

South Indian Bank’s Action

Similarly, South Indian Bank has announced that it will not onboard any new customers for co-branded credit cards until it achieves full compliance with the regulatory directives.

Continued Offerings to Customers

Both banks assure customers that they will continue to provide services to existing customers holding co-branded credit cards issued by the respective banks.

Regulatory Amendments by the RBI

Enhanced Monitoring Mechanism

On March 7, the RBI amended the Master Direction on Credit Card and Debit Cards, emphasizing the need for an effective mechanism to monitor the end use of funds by cardholders.

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Secure Data Handling

The amended directives require card issuers to ensure that card transaction data is securely managed. Specifically, transaction-related data may be encrypted and displayed on co-branding partner platforms for cardholder convenience, with stringent security measures in place to protect privacy.

Restrictions on Data Sharing

Furthermore, the RBI stipulates that card issuers must refrain from sharing card data, including transaction data, with outsourcing partners unless it is essential for the latter to carry out their assigned functions.

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Prohibition of Network Restraints

In another directive issued on March 6, the RBI prohibited card issuers from entering into arrangements with card networks that restrict them from utilizing services offered by other networks. Additionally, card issuers are required to offer eligible customers the option to choose from multiple card networks at the time of issuance or renewal.