Guidelines on Issue of Co-Branded Credit Cards

Guidelines on Issue of Co-Branded Credit Cards

The Reserve Bank has decided to allow certain NBFCs to issue co-branded credit cards with banks. This is to diversify their business areas. These NBFCs can issue these cards with scheduled commercial banks without sharing the risk. They need the Reserve Bank’s approval first. This permission is for two years initially, followed by a review. To be eligible, NBFCs must meet these criteria:

  • They should have a minimum Net Owned Fund (NOF) of ₹100 crore.
  • They must have made a net profit in the last two years, as per audited accounts.
  • Their net Non-Performing Assets (NPAs) to net advances ratio should not exceed 3 percent, as per the last audited balance sheet.
  • NBFC-BL (excluding NBFC-MFIs) should maintain a Leverage Ratio of seven. Other NBFCs and NBFC-MFIs should have a Capital to Risk (Weighted) Assets Ratio (CRAR) of 15 percent.

NBFCs also need to follow these operational and other requirements:

Operational Aspects:

  • NBFCs can only market and distribute these co-branded credit cards. The issuing bank will follow its regulatory authority’s guidelines.
  • The bank issuing the card is responsible for fulfilling all Know Your Customer (KYC) requirements.
  • Any risks from the co-branded credit card business should not affect the NBFC’s main business.
  • Customers will maintain their co-branded credit card account with the bank. Payments will be made to the bank, not debited from any account the customer might have with the NBFC.
  • NBFCs must ensure customer account confidentiality. The bank issuing the card cannot access customer details that would breach the NBFC’s secrecy obligations.
  • The issuing bank must handle customer complaints related to credit card services.
  • Any legal risks, like court cases or damages, will be borne by the issuing bank.

Other Aspects:

  • NBFCs must have a Fair Practices Code in place.
  • They should adhere to KYC Guidelines and the Prevention of Money Laundering Act, 2002.
  • They must comply with relevant RBI Act, 1934 instructions and provisions.
  • They should follow any other terms the Reserve Bank may specify.
  • The Reserve Bank can withdraw this permission with a three-month notice if it finds any undesirable or unhealthy operations.

 Introduction to RBI – NBFC Scale Based Regulation

Regulations applicable for NBFC-BL

Regulations applicable for NBFC-ML

Regulatory Instructions for NBFC-UL

Directions for NBFC – Micro Finance MFIs

Specific Directions for NBFC-Factors and NBFC-ICCs

Specific Directions for Infrastructure Debt Funds IDFs-NBFC

Scoring Methodology for Identification of NBFC as NBFC-UL

Regulatory Guidance on Implementation of Ind AS by NBFCsv

Norms on Restructuring of Advances by NBFCs

Early Recognition of Financial Distress

Flexible Structuring of Long Term Project Loans to Infrastructure and Core Industries

Guidelines on Liquidity Risk Management Framework

Disclosures in Financial Statements – Notes to Accounts of NBFCs

Managing Risks and Code of Conduct in Outsourcing of Financial Services by NBFCs

Guidelines for Credit Default Swaps – NBFCs as Users

Guidelines on Private Placement of NCDs by NBFCs

Guidelines for Entry of NBFCs into Insurance

Guidelines on Distribution of Mutual Fund Products by NBFCs

Guidelines on Perpetual Debt Instruments

Guidelines on Liquidity Coverage Ratio (LCR)

Balance Sheet Disclosure Guidelines for NBFCs in Middle Layer and Above

Self-Regulatory Organization (SRO) for NBFC-MFIs – Criteria for Recognition