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Mumbai: The Reserve Bank of India (RBI) said it has asked a card network, which it did not name, to pause payments under an arrangement that allowed businesses to make card payments to entities that did not accept such payments.
“It has come to the notice of the Reserve Bank of India that a card network had an arrangement that enabled businesses to make card payments through certain intermediaries, to entities that do not accept card payments,” the RBI wrote in a statement posted on its website.
While central bank did not name the card network, a spokesperson for Visa had said in a statement on Wednesday that it received a communication from the RBI on 8 February, “in what appears to be an industry-wide request for information on the role of business payment solution providers (BPSPs) in commercial and business payments”. A spokesperson for the company said, “That communication included a direction that we hold all BPSP transactions in abeyance.”
The RBI said that under the unauthorised arrangement, an intermediary would accept card payments from corporates for commercial payments and remit the funds through Immediate Payment Service (IMPS), Real Time Gross Settlement (RTGS), and National Electronic Fund Transfer (NEFT) to recipients that don’t accept card payments.
“On closer scrutiny, it was observed that this arrangement qualified as a payment system. Under the provisions of Payment and Settlement Systems (PSS) Act, 2007, such a payment system requires authorisation under Section 4 of PSS Act, which has not been obtained in the instant case,” said the RBI.
According to the regulator, the payment mechanism raised other concerns, too. The intermediary, for instance, would pool large sums into an account that was not designated under the PSS Act.
“Transactions processed under this arrangement did not comply with the originator and beneficiary information requirements, as stipulated under the master direction on know your customer (KYC) issued by the Reserve Bank,” it said.
It added that the matter was under detailed examination and that the card network had been advised to halt all such arrangements until receiving further orders. “It is clarified that the Reserve Bank has not placed any restriction with respect to normal usage of business credit cards,” it said.
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Published: 15 Feb 2024, 08:04 PM IST
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