RBI may be more open to granting credit card licences to NBFCs: Macquarie

With the Reserve Bank of India (RBI) tightening co-branded cards issuance framework by disallowing sharing of transaction data by issuing entities with their co-branded partners, it might be more open to granting licenses to various large players and non-banks like Bajaj Finance thereby increasing competition in the segment, said Macquarie Research in a note on Friday.

In its master direction, the RBI said, “The co-branding partner shall not have access to information relating to transactions undertaken through the co-branded card”.

“The role of the co-branding partner entity under the tie-up arrangement shall be limited to marketing/distribution of the cards and providing access to the cardholder for the goods/services that are offered,” the RBI further said.

RBI also made it clear that NBFCs will have to take prior approval from the RBI for issuing credit cards to their customers.

Banks tie up with various entities, including non-banks, e-commerce companies, food delivery apps, airline companies, and others, to issue co-branded credit cards. For example: ICICI Bank has a tie up with Amazon, Axis Bank has a tie up with Flipkart, RBL Bank has tie up with Bajaj Finance for co-branded credit cards, etc.

"Since data sharing is now stopped, the interpretation is that RBI will be more open for a liberal credit card licensing regime and will be fine with NBFCs retaining risk on the balance sheet, as per bankers," Macquarie Research’s note said.

Further the research note suggests that RBI’s new rule of activating the card within 30 days of issuance, failing which the card may get cancelled, may pose some challenges as in many cases the credit card gets activated much later than 30 days.

“In fact, in many cases, there is a 15-day delay between the issuance date and the customer receiving the card in his hand. So, this will increase the intensity of calling/servicing to activate the cards, thereby pushing operating expenses. There are some other minor operational requirements that have to be met by card issuers,” the research report noted.