MUMBAI: India's central bank on Wednesday said issuers of credit cards cannot enter into any arrangement or agreement with card networks that restrain customers from availing the services of other networks.

"On a review, it is observed that some arrangements existing between card networks and card issuers are not conducive to the availability of choice for customers," the Reserve Bank of India (RBI) said in a circular.

Issuers will have to provide an option to eligible customers to choose from multiple networks at the time of the card's issuance, the RBI said.

The change has been made solely to enhance customer choice, a source familiar with the central bank's thinking said.

For existing cardholders, the option would have to be provided at the time of the next renewal, the circular said.

The requirement to offer customers a choice of card networks will become mandatory six months from the issue of the circular, the RBI added.

Issuers with less than 1 million active credit cards are exempted from the requirement, while those who issue cards on their own authorised network are also excluded.

Networks of American Express, Diners Club International, Mastercard, Visa and homegrown RuPay provide services to customers in India, but the provider is usually predetermined by the bank depending on the card issued.

Mastercard, Visa and Rupay did not immediately respond to a request for comment.

The change is likely to negatively impact large partnerships where both the issuer and the network contributed towards rewards or incentives offered to customers, an executive with a card network said.

The source and others cited in the report declined to be named as they are not authorised to speak to the media.

"Currently, customers are required to send a letter to ask for a switch in card network," said a banker with a private bank.

"Now, that choice will become mandatory for issuers to offer at the time of issuance and renewal." (Reporting by Siddhi Nayak and Jaspreet Kalra in Mumbai; Editing by Sohini Goswami)