RBI Bans Issuance of Co-Branded Credit Cards by Federal and South Indian Bank

On Wednesday, the Reserve Bank of India instructed South Indian Bank and Federal Bank to halt the issuance of all new co-branded credit cards. Both banks have agreed to stop onboarding new customers in the co-branded credit card segment. As per exchange fillings, RBI has taken this step due to regulatory deficiencies.

There will be no changes to the onboarding process for these banks’ non-branded credit cards, and services will not be disrupted for existing co-branded cardholders.

What Does Federal Bank Say?

“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 and Federal Bank both offer the popular co-branded OneCard Credit Card, which means that they will no longer be able to onboard any new customers for this card. Other issuers that offer the OneCard include BoB Financial Services, CSB Bank, Indian Bank, and SBM Bank. Federal Bank also offers three credit cards in the non-cobranded segment, namely the Signet, Imperio, and Celesta Credit Cards.

Bottom Line

Earlier in February, RBI asked credit card networks to stop commercial payments via credit cards. And now, this latest move by the Reserve Bank of India displays its commitment towards tightening regulatory guidelines.

On March 7th, RBI amended the master direction regarding credit and debit cards. This also made changes to co-branded credit cards and the steps for their issuance. The temporary ban on the issuance of co-branded credit cards by Federal and South Indian Bank has come due to regulatory deficiencies as reported by the exchange fillings. Both banks have said they would not onboard any new customers to their co-branded credit cards until they are fully compliant with the guidelines.

People looking to apply for the Scapia and Fi CoBranded Credit Cards shall now have to wait until this ban is lifted before getting their new cards. Meanwhile, the OneCard Credit Card can still be availed as other banks issue it.