New Credit/Debit Card Rules: Extension Granted For These Changes Till October, 2022 (Get Full Details)

The Reserve Bank of India (RBI) has decided to provide a three-month extension after June 30, 2022 for certain provisions considering the changes for credit, debit, and co-branded card norms.

Extending Timeline

In the announcement, RBI said, “Considering various representations received from the industry stakeholders, it has been decided to extend the timeline for implementation of the following provisions of the Master Direction to October 01, 2022,”.

Prior to this, banks had sought a six-month extension on the changes in the Master Directions for cards through the apex body Indian Banks’ Association (IBA) on June 14.

Notaly, the extension has only been granted for the provision that mandated that card-issuers seek One Time Password (OTP) based consent from the cardholder for activating a credit card if it has not been activated by the customer themselves for more than 30 days from the date of issuance.

Impacted Fintech Player

As per the second provision mandate, the credit limit is not breached at any point in time without seeking explicit consent from the cardholder, and lastly no capitalization of unpaid charges/levies/taxes for charging/ compounding of interest.

It is noteworthy here that no relief has been granted on the provisions that are set to impact fintech players come July 1.

Limited Role Of Co-branding Entities

Besides this, certain provisions in the Master Direction limited the role of co-branding entities to marketing and distribution of credit or prepaid cards.

This way, casting a shadow on the viability of the business models of card issuing fintechs such as Slice, Uni, OneCard, Fi, PayU’s LazyPay and Jupiter.

As per these changes, the co-branding partner shall not have access to information relating to transactions undertaken through the card.

This change is having the potential to hit the business models of these companies as they use customers’ transaction data to provide customers a snapshot of their spends and extend rewards based on these spends.

Now these fintechs, alongwith their partner banks like SBM Bank India, RBL Bank, Federal Bank etc. are trying to find a way around these norms in a way that the main co-branding entity will not save data, said the sources.

A Separate Entity

That being said, now fintechs are mulling on creating a separate entity acting as a Technology Service Provider (TSP) which can access the data. 

This TSP will come under RBI’s IT outsourcing norms and banks can outsource data to such an entity. 

Notably, the main co-branding entity under fintech will be a separate entity and will not be allowed to access data, said the sources.

But, achieving this work by June 30 will be an uphill task and can also impact operations in the meanwhile.

These norms are also affecting the other co-branded cards that banks issue with e-commerce and retail merchants such as Amazon, Flipkart, Zomato etc. 

Although, the Fintechs through different associations, had requested RBI to differentiate between them and other merchant co-branding entities while implementing norms.

According to a fintech executive, “Merchant co-branding entities don’t have any oversight from banks. Fintech co-branding entities, on the other hand, work under the direct supervision of banks. Unfortunately, the norms do not differentiate between both kinds of entities.”

This would impact some of these fintechs even more after RBI issued a clarification on June 20 saying issuing of credit lines through prepaid instruments like wallets and prepaid cards is prohibited.

Basically, it threatens the business models of players like Slice, Uni, KreditBee and others.