Federal Bank stops issuing co-branded credit cards after RBI directive
Upstox
2 min read • Updated: March 13, 2024, 8:06 PM
Summary
Federal Bank said that it has taken steps to correct areas that are deficient and will seek regulatory clearance before resuming new issuance.
Private lender Federal Bank on Wednesday said that it has stopped issuing fresh co-branded credit cards following the Reserve Bank of India’s guidelines.
Federal Bank shares tanked around 3% to settle at ₹147 apiece on NSE amid a bloodbath in the broader market where benchmark indices Nifty and Sensex plunged up to 1.5%.
In an after-market stock exchange filing, Federal Bank said that it has received a letter dated March 12, 2024, from the Reserve Bank of India over the co-branded credit cards.
The bank has “stopped issuance of new co-branded credit cards”, the lender informed the bourses.
Federal Bank also said that it has taken steps to correct areas that are deficient and will seek regulatory clearance before resuming new issuance.
However, it will continue to offer new credit cards to customers in the non-co-branded area. Meanwhile, customers who hold co-branded credit cards issued by Federal Bank will continue to get service from the bank.
The development has come amid the banking regulator sharpening its scrutiny over co-branded credit cards by various entities.
The co-branded credit card segment has seen a sharp growth in the past few months attracting regulatory glare. The central bank this month issued regulatory guidelines to check unauthorised entry into the highly regulated credit card segment.
Amending its Master Guidelines issued in 2022 on credit cards, the RBI stated that co-branded cards will explicitly indicate that the card was issued under a co-branding arrangement.
The co-branding partner cannot advertise or market the card as its own product. The name of the card-issuer will be clearly shown in all marketing and advertising materials.
The co-branding partner won’t have access to information relating to transactions undertaken through the co-branded card, according to RBI guidelines.
Another private lender, South Indian Bank also suspended temporarily the issuance of co-branded cards to new customers in compliance with RBI directives.