The Reserve Bank of India (RBI) has issued notices to Federal Bank and South Indian Bank, directing them to halt the issuance of new co-branded credit cards. The two banks informed the stock exchanges about this development.
South Indian Bank stated that the regulatory action is in line with the norms issued by the RBI on March 7th. The bank will not on-board any fresh customers under co-branded credit cards until it achieves full compliance with the regulatory guidelines.
Both Federal Bank and South Indian Bank have assured that they will continue to offer credit cards to new and existing customers in the non-co-branded segment. Furthermore, they will continue to service existing co-branded cardholders.
The banks did not provide further comments on the issue at the time of publication.
According to market sources, the common link between the two banks is likely to be OneCard, a co-branded metal card issuer. OneCard has tie-ups with six issuers, including Federal Bank and South Indian Bank.
The RBI’s March 7th amendments stipulate that co-branded cards must explicitly indicate that they have been issued under a co-branding arrangement. Additionally, the co-branding partner is not allowed to advertise or market the co-branded card as its own product, and the name of the card issuer must be clearly displayed in all marketing and advertising materials.
Furthermore, the co-branding partner is not permitted access to information related to transactions conducted through the co-branded card and should not be involved in any post-issuance processes or controls, except for being the initial point of contact for grievances.
The RBI’s actions aim to ensure transparency and compliance with regulatory guidelines in the co-branded credit card segment, safeguarding consumer interests and maintaining the integrity of the financial system.
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