RBI New Guidelines for Credit Cards 2024: Now RuPay will dominate everyone’s cardnetwork in India

RBI New Guidelines for Credit Cards 2024: Now RuPay will dominate everyone's cardnetwork in India

The Reserve Bank of India has announced important changes in the rules for issuing credit cards.
According to the new instructions, people will now have the right to select the network on their credit cards, giving them the option to choose the network of their favorite company for example Rupay, Master Card, Visa.
New rules have been tested regarding the arrangement between the card network and the bank.
Banks and NBFCs have tie ups with big card networks and a rate is decided on negotiation regarding processing fee for reward points due to which a credit card reaches the customer without giving him any option.
The new guidelines will provide customers with more freedom and choice, helping them choose the most suitable credit card as per their needs. The new instructions will come into effect from 6 September 2024.
This new rule has caused a slowdown and change in this segment, which will now give banks an opportunity to increase self-reliance.

What is card network?

  • Purpose: Card networks connect your bank, merchants, and you to enable secure, smooth, and efficient transactions.
  • Verification Process: When you use your card at a merchant’s point-of-sale (POS) machine, the card network links the acquiring bank (the merchant’s bank) with the issuing bank (your bank). It verifies that your card details are legitimate and that you have sufficient balance to make the payment.
  • Issuing Bank: The issuing bank provides you with the card. It’s the financial institution that issues credit or debit cards to customers.
  • Acquiring Bank: The acquiring bank communicates with both the issuing bank and the merchant to facilitate the transaction.
  • Successful Payment: If the transaction is successful, the issuing bank transfers the money to the acquiring bank, which notifies the merchant.
  • Authorized Networks in India: In India, there are five authorized card networks:
  • RuPay: Launched by the National Payments Corporation of India (NPCI), RuPay is highly secure and widely accepted at POS devices, ATMs, and e-commerce websites.
  • Visa: Visa cards (including debit, credit, prepaid, and gift cards) are issued by partner financial institutions. Visa has global acceptance.
  • MasterCard: MasterCard offers various card types for successful transactions. Examples include Regalia Gold Credit Card and Millennia Prepaid Card.
  • American Express: Known for premium services, American Express provides credit cards and charge cards.
  • Diners Club: Diners Club is another card network available in India.

How credit card transaction processing works

how credit card works

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  1. Cardholder: The individual who owns the credit card and uses it for purchases.
  2. Merchant: The business or service provider that accepts credit card payments in exchange for goods or services.
  3. Point-of-sale (POS) system: The hardware and software used by businesses to accept and process credit card transactions.
  4. Payment gateway: A service that securely transmits transaction information between the business’s POS system and the credit card processor.
  5. Credit card processor: Also known as the “payment processor,” this company collaborates with card networks and issuing banks to authorize, authenticate, and settle credit card transactions on behalf of the business.
  6. Card networks: entities like Visa, Mastercard, American Express, and Discover that facilitate communication between credit card processors and issuing banks, while also setting transaction rules and standards.

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