RBI Halts Co-branded Card Issuances: Controversy, Guidelines, And Consumer Advice

The Reserve Bank of India (RBI) has ordered the Federal Bank and South Indian Bank to stop issuing new co-branded credit cards, signaling increased regulatory scrutiny Federal Bank said in a stock exchange note that it trying to make up for the deficiencies and would await regulatory approval before issuing additional documents. However, it would continue to offer credit cards to new and existing customers in the non-co-brand segment. Similarly, South Indian Bank has said that it will not enroll new customers for its newly branded products until regulatory requirements are met. Both banks confirmed that they will continue to serve existing customers with co-branded credit cards.

The lenders did not disclose the reasons cited by the central bank but said the guidelines followed recent changes to the rules governing credit and debit cards. As part of that rule, the RBI has reiterated that branding partners with credit cards cannot access customer data or engage in any transaction after the card is initially issued. The banks did not indicate in their filings to the banks whether the sanctions imposed were due to a breach of this provision or some other circumstance.

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Co-branded Card Controversy: “The co-branded card controversy relates to increased scrutiny by the RBI on partnerships between banks and fintechs, especially in the case of co-branded credit cards. The purpose of this regulatory opinion is to ensure that these entities adhere to financial standards and ensure that consumer interests are protected, in the context of business concerns and financial arrangements of such transactions,” Raj Khosla, founder and MD, MyMoneyMantra.com said.

RBI Guidelines: Under the revised RBI rules on co-branded credit cards, the name of the issuer appears on all such cards apart from what can be clearly displayed on the card itself and any labels encourage people under the co-branded scheme There should be clear disclosure in marketing and advertising materials, to ensure that the customer is transparent and clear about the nature of the card and the provision of participatory organizations.

What Should Consumers Keep In Mind: Consumers should be alert to increased scrutiny and regulation of their credit cards, especially the revised regulations It is important to understand the identity of the issuer, how the co-brand program works, and subject to any special features or restrictions in the card. “Being aware of the transparency and clarity of business terms from affiliate programs can help consumers make informed decisions and ensure they get the full benefit from their credit card in products and wages,” Khosla added.