The Reserve Bank of India (RBI) has directed a card network to cease an unauthorized arrangement enabling business card payments without disclosing the network’s name.
RBI’s notice revealed that the arrangement facilitated businesses to make card payments through intermediaries to entities not accepting card payments, prompting regulatory action.
Operational Status and Directives by RBI:
According to the RBI, only one card network has implemented this arrangement in India. The network has been instructed to suspend all such arrangements pending further regulatory orders as the matter undergoes thorough examination.
Visa’s Compliance Statement:
Visa, one of the card networks, confirmed regulatory directives to suspend Business Payment Service Provider (BPSP) transactions until further notice, in compliance with RBI’s instructions.
The intermediary’s process of accepting card payments for commercial transactions and subsequent fund transfers via IMPS/RTGS/NEFT to non-card-accepting recipients contravenes the Payment and Settlement Systems (PSS) Act, 2007.
Legal Infringement and Concerns:
RBI highlighted the arrangement’s lack of legal authorization under the PSS Act, raising concerns over fund pooling, non-compliance with originator and beneficiary information requirements, and the absence of designated accounts.
KYC Compliance and Transaction Integrity:
Transactions processed under the arrangement failed to meet Know Your Customer (KYC) master direction standards issued by RBI, compromising transaction transparency and integrity.
RBI clarified that the regulatory intervention does not restrict the standard usage of business credit cards, maintaining a delineation between authorized business card operations and the aforementioned unauthorized arrangement.
The Reserve Bank of India (RBI) has directed a card network to cease an unauthorized arrangement enabling business card payments without disclosing the network’s name.
RBI’s notice revealed that the arrangement facilitated businesses to make card payments through intermediaries to entities not accepting card payments, prompting regulatory action.
Operational Status and Directives:
According to the RBI, only one card network has implemented this arrangement in India. The network has been instructed to suspend all such arrangements pending further regulatory orders as the matter undergoes thorough examination.
Visa, one of the card networks, confirmed regulatory directives to suspend Business Payment Service Provider (BPSP) transactions until further notice, in compliance with RBI’s instructions.
The intermediary’s process of accepting card payments for commercial transactions and subsequent fund transfers via IMPS/RTGS/NEFT to non-card-accepting recipients contravenes the Payment and Settlement Systems (PSS) Act, 2007.
Legal Infringement and Concerns:
RBI highlighted the arrangement’s lack of legal authorization under the PSS Act, raising concerns over fund pooling, non-compliance with originator and beneficiary information requirements, and the absence of designated accounts.
KYC Compliance and Transaction Integrity
Transactions processed under the arrangement failed to meet Know Your Customer (KYC) master direction standards issued by RBI, compromising transaction transparency and integrity.
RBI clarified that the regulatory intervention does not restrict the standard usage of business credit cards, maintaining a delineation between authorized business card operations and the aforementioned unauthorized arrangement.
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