Is it true that RBI is going to allow NBFCs to issue credit cards?

To boost the card issuances and to give NBFCs their due in the credit market, RBI is likely to allow NBFCs to also issue standalone credit cards. Currently, NBFCs are only allowed to issue credit cards that are co-branded with banks. In India, the number of credit cards has lagged the number of debit cards but a huge margin. This is in contrast to global trends where credit cards lead the way. RBI is currently talking to some leading NBFCs.

As stated earlier, NBFCs can currently only issue credit cards that are co-branded credit cards with banks. In the new set-up, NBFCs can actually originate credit cards and directly tie up with Visa or MasterCard, or RuPay for processing transactions and back-office management. This will ensure that the customer ownership stays with the NBFCs and they don’t need to share the data with banks, to avoid any conflict of interest.

The idea was first mooted by RBI in 2004, but the debate has not been pushed further. In recent times, new-age Fintech players and digital lenders are beginning to redefine financial intermediation. It is only fair to allow the additional facility to NBFCs to offer a better palate to customers. As per a report authored by NITI Aayog and Mastercard, NBFCs accounted for almost 20% to 30% of the total credit in the system, so this is a logical extension.

The market opportunity is huge. As per data in the RBI Bulletin, there are 6.70 crore credit cards in India as compared to 93.40 crore debit cards. Incidentally, there are nearly 55 crore Indians having an existing credit bureau history and track record. Most of them would be eligible for a credit card. NBFCs can now look to tap with their more flexible and decentralized network to tap such customers.