written by khatabook | December 21, 2022

All You Need To Know About An Issuing Bank - Benefits and Types

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Table of Content


An issuing bank is a bank that provides credit to a cardholder by issuing a credit card or, more often, a line of credit. The cardholder can use the credit card to make purchases or withdraw cash up to the credit limit set by the issuing bank. The issuing bank is also responsible for billing the cardholder for the outstanding balance on the credit card. Most major banks offer credit cards, and many of them also offer lines of credit. 

However, there are some banks that specialise in issuing credit cards and lines of credit. These banks are called issuers. Issuers often work with retailers to offer special financing deals to shoppers. For example, an issuer may offer 0% APR financing on purchases made at a particular store. When you are shopping for a credit card, it's important to know which bank is the issuer. That way, you can research the bank's reputation and customer service record. You can also compare interest rates and fees to find the best deal.

Did you know that RBI was founded on April 1, 1935 as a private entity. It was a shareholder’s bank in its initial years. The nationalisation of RBI took place in the year 1949 and it became a fully government owned entity.

Meaning of Issuing Bank 

In India, an issuing bank is a bank that provides services to a cardholder, including issuing the card, maintaining the account, and processing transactions. The issuing bank may also be referred to as the card-issuing bank or the primary bank. The issuing bank is typically different from the acquirer, which is the bank that provides services to the merchant. 

In the credit card industry, the issuing bank is the financial institution that gives the cardholder a line of credit. The issuing bank is also responsible for maintaining the cardholder's account and billing the cardholder for purchases made with the credit card. When a cardholder makes a purchase, the issuing bank pays the merchant and then bills the cardholder for the purchase amount. The issuing bank may also charge interest on the outstanding balance if the cardholder does not pay the full amount owed each month. 

Issuing banks are typically large, well-established financial institutions. In the United States, some of the largest issuing banks include JPMorgan Chase, Bank of America, Citigroup, and Capital One. In India, some of the largest issuing banks include HDFC Bank, ICICI Bank, and Axis Bank.

Also Read: All About UPI– United Payments Interface

What are the key features of an issuing bank in India?

An issuing bank in India must have a current account with the Reserve Bank of India (RBI). The issuing bank also needs to be a member of the Credit Information Bureau (India) Ltd (CIBIL) and have a minimum net worth of 50,00,00,000.

The main functions of an issuing bank are to issue credit cards to customers, process customer transactions, and provide customer support. They also need to manage the credit card portfolio, including issuing new cards and canceling old ones.

Some of the key features of an issuing bank in India are:

  • They must have a current account with the RBI.
  • They need to be a member of the Credit Information Bureau (India) Ltd (CIBIL).
  • They must have a minimum net worth of 50,00,00,000 .
  • They need to manage the credit card portfolio.
  • They need to provide customer support.

How does an issuing bank work?

An issuing bank is a financial institution that provides loans to individuals and businesses. The issuing bank is the lender and is responsible for disbursing the loan amount to the borrower. The borrower then repays the loan amount to the issuing bank, with interest.

The issuing bank may be a commercial bank, a savings and loan association, a credit union, or a specialized lending institution such as a finance company. The loan may be for a specific purpose, such as to purchase a car or to finance a business expansion, or it may be a general-purpose loan, such as a home mortgage or a line of credit.

The issuing bank evaluates the borrower's creditworthiness and ability to repay the loan. The bank then sets the interest rate and terms of the loan. The borrower is responsible for repaying the loan, with interest, according to the terms of the loan agreement.

If the borrower defaults on the loan, the issuing bank may take legal action to recover the loan amount. The borrower may also be subject to late fees and other penalties.

Also Read: Digital Payment Methods - Types & Benefits of Different Digital Payment Methods

What are the benefits of having an issuing bank?

Some benefits of having an issuing bank include: 

 Access to credit

 Issuing banks can provide their customers with access to credit, which can be used for a variety of purposes including making purchases, consolidating debt, or financing a large purchase.

Convenience

Having an issuing bank can make life more convenient by allowing customers to make purchases without having to carry cash or write checks. In addition, many issuing banks offer online and mobile banking services that make it easy to manage your account and make payments.

Rewards

Many issuing banks offer rewards programs that allow customers to earn points or cash back on their purchases. These programs can be a great way to save money or earn rewards for your spending.

Protection

Issuing banks offer their customers a degree of protection against fraud and identity theft. In addition, most issuing banks provide some level of insurance on their products, which can protect customers in the event of loss or damage.

Customer service

Issuing banks typically offer their customers a high level of customer service, which can be helpful if you have questions about your account or need assistance with a transaction.

Also Read: Government Testing ‘UPI Lite’ for Payments without Internet

What are the different types of issuing banks in India?

There are four different types of issuing banks in India:

Public Sector Banks

Public sector banks are banks that are owned by the government. These banks are typically large, well-established banks that have a wide network of branches across the country. Some of the most popular public sector banks in India include State Bank of India, Punjab National Bank, and Bank of Baroda.

Private Sector Banks

Private sector banks are banks that are owned by private individuals or companies. These banks are typically smaller than public sector banks and often have a more limited network of branches. Some of the most popular private sector banks in India include HDFC Bank, ICICI Bank, and Axis Bank.

Foreign Banks

Foreign banks are banks that are headquartered in another country but have a presence in India. These banks typically offer a range of products and services to Indian customers and often have a wide network of branches across the country. Some of the most popular foreign banks in India include Citibank, HSBC, and Barclays.

Cooperative Banks

Co-operative banks are banks that are owned and operated by a group of individuals or a cooperative society. These banks typically offer a range of products and services to their members and often have a limited network of branches. Some of the most popular cooperative banks in India include Kerala State Co-operative Bank and Karnataka State Co-operative Bank.

Also Read: Virtual Payment Address (VPA)– A new mode of payment

Conclusion

In India, banks are the primary issuing authority for credit and debit cards. There are a number of banks that issue cards in India, including state-owned banks, private banks, and foreign banks. Each bank has its own policies and procedures for issuing cards, so it is important to compare options before choosing a bank. State-owned banks are typically the largest banks in India and have the most branches. They often offer competitive rates and fees, and they are usually more accessible to customers in rural areas. 

Private banks are typically smaller and offer more personalized services. They may have higher rates and fees, but they may also offer more perks and rewards. Foreign banks typically have the most experience in issuing credit and debit cards, and they often offer the best terms and conditions. When choosing a bank, it is important to consider its reputation, fees, and customer service. It is also important to compare the features and benefits of different cards before choosing one.

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FAQs

Q: What are the benefits of using an issuing bank?

Ans:

There are many benefits of using an issuing bank, including the following:

  • Convenience: Issuing banks provide a convenient way to pay for goods and services.
  • Security: Issuing banks offer a secure way to pay for goods and services.
  • Rewards: Some issuing banks offer rewards programs, such as cashback or points, for using their payment services.
  • Customer service: Issuing banks offer customer service support in case there are any problems with the payment service.

Q: What are the main functions of an issuing bank?

Ans:

The main functions of an issuing bank are to provide payment services, issue payment instruments, and manage the associated payment card network. The issuing bank is also responsible for the safety and security of the payment instrument and the associated payment card network.

Q: What are the main types of issuing banks in India?

Ans:

There are four main types of issuing banks in India: commercial banks, development banks, cooperative banks, and foreign banks.

Q: What is an issuing bank?

Ans:

An issuing bank is a financial institution that provides payment services for clients by issuing payment instruments, such as debit and credit cards. The issuing bank is responsible for the management and issuance of the payment instrument, as well as the associated payment card network.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.