(Adds more details on the probe, context)
By Carolina Mandl
SAO PAULO, Oct 25 (Reuters) - Brazilian antitrust agency Cade opened an investigation into the country's largest private-sector lender, Itau Unibanco Holding SA, and its card processor Rede for alleged anticompetitive practices, according to a statement on Friday.
Cade said Itau should not be able to demand that merchants have a checking account in the bank as a condition to advance credit card payments to them.
In April, Itau said it would pay merchants in two days with no interest rates, compared with the usual 30 days, in an unprecedented market move. The offer, however, was only available for small- and mid-sized companies with checking accounts at the bank.
Itaú said in a statement the terms offered by its card processor were helping to foster competition and lower costs for businesses.
Although Cade did not block Itau from paying merchants in two days, the watchdog said this practice could hinder competition in the medium-term. Cade will investigate the consequences of the terms offered by Itau.
Reporting by Carolina Mandl Editing by Chris Reese