Restrictions on Mastercard impacts several Banks

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New Delhi: Soon after the restriction imposed by the Reserve Bank of India (RBI) on Mastercard from onboarding new customers for its inability to meet data localization rules will impact a few of the associated banks more than the others.

Nomura, the Japanese broker stated in a report on Thursday that, among the credit card issuers, RBL Bank Ltd, and Bajaj Finserv Ltd. lending are most likely to get impacted by this restriction, since their entire card schemes are allied with MasterCard.

60 percent of the HDFC’s card schemes are tied to Mastercard, Amex, and Diners, while for Axis Bank Ltd. and ICICI Bank Ltd. it’s 35-36%. Kotak Mahindra Bank Ltd.’s card portfolio is entirely associated with VISA and so, it won’t face any issues.

Since HDFC is strictly prohibited from issuing any new cards, it won’t add to any increment of card scheme in terms of profit, however, it remains unknown in the case of other associated banks.

However, banks have started to forge-tie ups with Visa to replace Mastercard linkages.
On Thursday, RBL Bank notified its agreement with VISA to issue credit cards for its customers to the exchanges department, but it would take 8-10 days for the technology integration.

Currently, the Axis-Flipkart card and the ICICI Bank-Amazon Card are the two fastest-growing credit cards.

Meanwhile, the main concern still lies, that credit cards, profitable products for banks and earn a post-tax return on assets of 5-6%, could get impacted since banks will have a transition to a Visa or Rupay platform which takes time.
And to establish a new payment platform, it would take two months in total.