RBI bars Federal Bank, South Indian Bank from issuing co-branded credit cards

Reserve Bank of India has issued notices to Federal Bank and South Indian Bank to stop issuing new co-branded cards, the lenders notified the exchanges on Wednesday.

“We have stopped issuance of new co-branded credit cards. The Bank is in the process of rectifying the areas that are deficient and will seek regulatory clearance prior to resumption of new issuance,” Federal Bank said. 

South Indian Bank said that the regulatory action is in line with the norms issued on March 7, and that it will not on-board any fresh customers under co-branded credit cards until it is fully compliant with the regulatory guidelines.

Both the banks said they will continue to offer credit cards to new and existing customers in the non-co-branded segment and will also continue to service existing co-branded cardholders.

Federal Bank has three co-branded tie-ups with OneCard, a travel card with Scapia and the third with neo bank Fi. Outside of co-branded tie-ups, the bank has three key credit card variants on its own--Celesta, Imperio and Signet. South Indian only offers a co-branded credit card with OneCard.

Federal Bank did not respond to queries whereas South Indian Bank refused to comment on the issue till the time of print.

The common link between the two banks is likely to be OneCard, according to market sources. OneCard is a co-branded metal card issuer which has tie-ups with six issuers -- BoB Financial Services, CSB Bank, Federal Bank, Indian Bank, SBM Bank and South indian Bank. Cards issued by OneCard are usually marketed under the ‘OneCard’ brand and not that of the issuer bank. Scapia and Fi also market co-branded cards under their brand.

As per RBI’s March 7 amendments, co-branded cards need to explicitly indicate that the card has been issued under a co-branding arrangement. Further, the co-branding partner is not allowed to advertise/market the co-branded card as its own product, and the name of the card issuer needs to be clearly shown in all marketing and advertising material.

The co-branding partner (CBP) is not allowed access to information relating to transactions undertaken through the co-branded card, and should not be involved in any of the processes or the controls post-issuance of the card, except for being the initial point of contact in case of grievances.

“However, for the purpose of cardholder’s convenience, card transaction-related data may be drawn directly from the card-issuer’s system in an encrypted form and displayed in the CBP platform with robust security. The information displayed through the CBP’s platform shall be visible only to the cardholder and shall neither be accessed nor be stored by the CBP,” the central bank had then said.

COMMENT NOW