Federal Bank, South Indian Bank announce measures on co-branded credit cards

Credit,Cards

At least two bank viz., Federal Bank and South Indian Bank on March 13 announced measures on the co-branded credit card citing regulatory guidance received from the Reserve Bank of India (RBI), dated March 12, as per their exchange filings.

Federal Bank said it has stopped issuance of new co-branded credit cards, and South Indian Bank said it shall not on-board any fresh customers in co-branded credit cards until the bank fully complies with the regulatory guidelines issued in this regard.

The Federal Bank in an exchange filing said the bank is in the process of rectifying the areas that are deficient and will seek regulatory clearance prior to resumption of new issuance.

Further, the Federal Bank added that the bank will continue to offer credit cards to new and existing customers in the non-co-branded segment.

Both banks said they will continue to service the existing customers holding co-branded credit cards issued by the Bank.

On March 7, the central bank amended the Master Direction on Credit Card and Debit Cards and asked card issuers to put in place an effective mechanism to monitor end use of funds.

The central bank in the amended directions said for the purpose of cardholder’s convenience, card transaction related data may be drawn directly from the card issuer’s system in an encrypted form and displayed in the co-branding partner (CBP) platform with robust security.

“The information displayed through the CBP’s platform shall be visible only to the cardholder and shall neither be accessed nor be stored by the CBP,” the RBI said.

In the amended master directions, the central bank also said the card-issuers shall not share card data (including transaction data) of the cardholders with the outsourcing partners unless sharing of such data is essential to discharge the functions assigned to the latter.

On March 6, the RBI said card issuers should not enter into any arrangement with card networks that restrain them from availing the services of other card networks.

The card issuers need to provide an option to their eligible customers to choose from multiple card networks at the time of issue, the RBI said. For the existing cardholders, this option may be provided at the time of the next renewal, the RBI said.