RBI Finally Warms Up To Idea Of NBFCs Issuing Credit Cards
Can non-banks now be permitted to issue credit cards? The latest directions by the Reserve Bank of India appear to indicate so.
Non-banking financial companies registered with the RBI shall not undertake credit card business without the prior approval of the Reserve Bank, the central bank said in a press release on master directions for credit cards and debit cards on Thursday.
Any company including a non-deposit taking entity intending to engage in this activity shall require a certificate of registration and RBI's specific permission, it said. That's apart from the minimum net owned funds of Rs 100 crore—a prerequisite for NBFCs.
"Without obtaining prior approval from the Reserve Bank, NBFCs shall not issue debit cards, credit cards, charge cards, or similar products virtually or physically," the RBI said in its circular applicable to all scheduled commercial banks and non-bank lenders.
Vivek Iyer, partner, financial services-risk advisory at Grant Thornton, said that NBFCS will require RBI's specific approval along with the certificate of registration if they want to issue credit cards. The directions were brought amid heightened importance around credit card-related risk, he said.
Historically, only two NBFCs have received RBI approvals to issue credit cards: SBI Cards & Payment Services Ltd. and Bobcards Ltd., said Parijat Garg, an independent digital finance consultant and former credit bureau executive. Both these companies are subsidiaries of banks.
With the new set of guidelines, other large NBFCs such as Bajaj Finance Ltd. could also consider issuing their own cards rather than continue issuing co-branded credit cards, Garg said. "The guidelines require the RBI to approve such companies for issuing credit cards, so we need to see what the regulator's requirements from them are."
Mihir Gandhi, partner, at PWC, said as NBFCs were already offering credit through 'buy now, pay later' and other such products, credit cards will be complementary to these offerings.