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New RBI Rules Put Consumers First in Credit Card Game

If you’re a credit card user in India, heads up, the rules are changing in a big way, thanks to new rules from the Reserve Bank of India (RBI). And from where I’m standing, it looks like consumers are set to be the biggest winners.

Essentially, the RBI has cracked down on the cozy arrangements between banks/NBFCs and card networks like Visa, Mastercard and RuPay that restricted customer choice. No more will you be bound to just the network pre-selected by your card-issuing bank.

From September 2024 onwards, when getting a new credit card or renewing an old one, you’ll get to pick your preferred network – be it Visa, Mastercard, RuPay or Amex. Feeling like RuPay’s rewards are more suited to your lifestyle nowadays? Make the switch during renewal instead of being stuck with that Visa card your bank issued ages ago.

Now I can already hear the skeptics asking – “But won’t this just create an operational nightmare for banks?” That’s a fair point. Experts admit overhauling all the existing processes and agreements won’t be easy. As Nilesh Tribhuvan from White & Brief puts it, “Card issuers and networks will need to carefully navigate this new landscape, ensuring compliance while making the requisite changes.”

But, many see this temporary disruption as a necessary evil to break the monopoly of bigger networks and their stranglehold over top banks through exclusive contracts. Jayesh H of Juris Corp is blunt: “The RBI move demolishes those lopsided arrangements that older networks exploited, locking in major banks. This levels the playing field for competition.”

And let’s be honest, a bit of chaos is a small price to pay for more customer-friendly practices, right? By fostering competition between networks vying for our business, the RBI is prompting them to up their game with better rewards, features and the works.

As Adhil Shetty, CEO of BankBazaar, summarizes: “Customers can now choose a network that offers better rewards aligned with their lifestyles and spending patterns. Spotted American Express dangling more lucrative benefits? You can switch over instead of being tied to that Visa card.”

Of course, these new rules currently only apply to the bigger fish – banks with over 10 lakh credit card customers. But that itself accounts for 13 banks commanding 92% of India’s credit card market, including the top 4 giants that issue a whopping 70% of all cards nationally. So we’re hitting the major players first.

The 5 approved networks – Visa, Mastercard, RuPay, Amex and Diners Club – will now likely go into overdrive trying to woo these big issuers and their customers with attractive propositions. While Visa and Mastercard have long been the 800-pound gorillas, this could finally be RuPay’s chance to expand its homegrown presence.

At the end of the day, as India’s credit culture matures, a bit of upheaval paving the way for more consumer choice seems like a positive disruption. As someone toldingrules, things might seem chaotic initially, but mark my words – we credit card users are in for an exciting time with a whole new world of options opening up before us.

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