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Report: RBI may allow NBFCs to issue credit cards
As per the latest reports it is believed that the RBI might allow the issue of credit card by NBFC.
Till Now, the NBFC are only allowed to issue co branded credit cards. But New updates suggests that NBFC now will be allowed to issue credit card. It is being said that the RBI is planning to allow a few NBFC to issue credit card. This credit card can be issued and co branding will not be required. It’s plausible that NBFC will be allowed to issue credit card.
Question coming up 1st time discussion is going on the NBFCs to issue credit cards ?
- The same conversation regarding the allowance to NBFC to issue credit card came up around 18 years ago. The discussion were in regards to permit few Non deposit taking entities to issue credit card only after going through the process of registration along with fulfilling other requirements. The other legal requirements included possession of minimum limit of NOF.
- It is to be considered that the RBI under its circular, that RBI Never put any restriction on NBFC to issue credit card, it just suggested that every now and then the norms must be revised by NBFC.
What is the recommendations now regarding NBFCs to be issue debit cards?
- It is true that the needs and requirements of consumer are different as compared to 18 years aback. The Reserve bank of India might reconsider the cogitations that were made 18 years ago and will try to compare them with the report stating ‘Report of the working group on digital lending through Online Platforms and Mobile Apps’. This report was made public in order to attract any suggestions in last November.
- The report concluded that 44% of fintech capital was through digital lending start ups and with the new and upcoming players also the old players attempt to participate in digital lending , this shows a positive aspect of the fintech sector.
The report also included that obtaining a license to practice the business of issue of digital credit cards & other kind of credits, reason being that it make the objective of financial inclusion better.
Previous years, Both Mastercard and Government of India, after long discussion on that ‘NITI AYOG’ come together in their report pinned that NBFC has only 20% to 30% as compared to the total lending in system.
This clears that NBFC play a very important role In lending space and liberating NBFC to issue credit card, the lending percentage would definitely enhance and the people without access to any formal lending services would find achieving the target objective of financial inclusion lucrative.
What about NBFC allowance to issue debit Note?
It is true that the requirements & needs of consumer are different as compared to 18 years aback.
Current Situations of Reserve bank of India
Only BoB Card & SBI Card are the 2 NBFC are allowed to issue credit card as of now. As per the Circular by RBI that was issued 18 years ago, other private players have had approached RBI to get the permit to issue credit card and other associated services. Bajaj finance, Tata capital & reliance capital along with other were some NBFC that proposed that permit to issue credit card shall be given to these NBFC on a standalone basis on the network of VISA.E
During November end last year, 67 Million credit cards are operating in the current market with credit histories of 500 & 50 million consumers are available. There is a Big requirement to enhance the lending in current market, therefore NBFC shall be allowed to issue credit card.
In Summary
- It is apparent from the data available on histories of credit that the presence of credit is needed.
- It is essential for the government to fulfil the credit needs through formal sector, rather than solely relying informal sector. In informal sector the rates are high which adversely affects the Creditor.
- NBFC fulfil the demand , even at the places where the bank cannot reach, to increases the availability of credit to places where bank cannot reach, the NBFC shall be fully prepared to give out the credit in order to enhance its reach and financial inclusion.
- If the NBFC were permitted to issue credit card without the need of co-branding, it would prove to be helpful to give credit to people at low rates
