NEW DELHI: Without specifying the name, the Reserve Bank of India (RBI) on Thursday asked a card network to keep arrangements without legal sanction under abeyance. The central bank clarified it has not placed any restriction on normal usage of business credit cards.
It said a card network had an arrangement that enables businesses to make card payments through certain intermediaries, to entities that do not accept card payments. The intermediary accepts card payments from corporates for their commercial payments and then remits the funds via IMPS/RTGS/NEFT to non-card accepting recipients.
“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 payment system requires authorisation under Section 4 of PSS Act, which has not been obtained in the instant case. The activity was, therefore, without legal sanction,” the RBI said.
It said the payment mechanism raised other concerns too. The intermediary pooled a large amount of funds into an account, which is not a designated account under PSS Act.
Earlier, it was reported that the RBI asked Visa and Mastercard to stop card-based commercial payments made by small and large businesses due to concerns over KYC compliance. Agencies reported that Visa has acknowledged they have received a communication from the RBI 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. Ankit Ratan, CEO & co-founder at Signzy, said such regulatory hurdles can be avoided by adhering to the regulator’s rules and guidelines through innovative KYC solutions.