What changed
Previously, banks needed one-time RBI approval for co-branded prepaid instruments. Now, RBI grants general permission for rupee-denominated co-branded prepaid cards, provided banks follow the attached terms and conditions. Earlier circulars on smart cards (1999, 2001, 2002) are withdrawn.
What it means for you
Banks can now launch co-branded prepaid cards faster without seeking RBI approval each time, reducing time-to-market. However, they must have a board-approved policy, conduct due diligence on partners, and ensure full KYC/AML compliance. The issuing bank remains liable for all partner actions, so risk management is critical.
What you must do
- Update your board-approved policy to cover co-branding risks, including reputation risk and mitigation measures.
- Conduct thorough due diligence on non-bank partners before any tie-up; for financial entities, verify their regulator's approval.
- Ensure all co-branded cards comply with KYC/AML/CFT guidelines and PMLA obligations.
- Review existing co-branding arrangements to align with this circular's conditions.
- Treat the non-bank partner's role as limited to marketing/distribution or providing access to goods/services.
Who it affects
All scheduled commercial banks (excluding RRBs), Non-banking entities partnering with banks for prepaid cards, Bank compliance and risk management teams
Do we still need RBI approval for each co-branded prepaid card?
No, RBI has granted general permission for rupee-denominated co-branded prepaid cards, so prior approval is not needed. However, you must comply with the terms and conditions in the annex.
What happens to our existing co-branded prepaid card approvals?
If you had specific approvals earlier, you must ensure those arrangements now conform to this circular's conditions. The earlier smart card circulars (1999, 2001, 2002) are withdrawn.
Are foreign currency prepaid cards covered by this circular?
No, foreign currency-denominated prepaid cards remain subject to FEMA guidelines, not this circular.