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RBI directs Visa, Mastercard to halt card-based commercial payments: Here's why

The development comes on the heels of the RBI initiating regulatory actions against Paytm Payments Bank. Transactions done at other business outlets which may not be authorised to accept commercial card payments have been asked to be temporarily halted.

Anurag Roushan Edited By: Anurag Roushan @Candid_Tilaiyan Mumbai Published on: February 14, 2024 23:36 IST
RBI asks Visa, Mastercard to stop card-based commercial payments.
Image Source : FILE The image has been used for representative purposes only.

The Reserve Bank has directed Visa and Mastercard, two major players in international payments, to halt card-based commercial transactions made by small and large businesses. This action stems from concerns regarding compliance with Know Your Customer (KYC) regulations. Visa has confirmed receipt of communication from the regulator on February 8, while awaiting a response from Mastercard. 

Potential reason behind RBI's directive

This move follows the RBI's recent regulatory measures against Paytm Payments Bank. Sources within the industry suggest that the RBI's directives to Visa and Mastercard are motivated by worries over their failure to adhere to KYC norms. Transactions done at other business outlets which may not be authorised to accept commercial card payments have been asked to be temporarily halted.

Visa India issues statement

In a statement, a Visa India spokesperson told the media that "they have received a communication from the RBI on February 8 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. That communication included the direction that we hold all BPSP transactions in abeyance."

Visa further said that BPSPs are regulated and licensed by the RBI under the PA-PG (payment aggregators - payment gateways) guidelines. "We are proactively engaged and continue to be in discussions with the RBI and our ecosystem partners to ensure compliance," it stated. The US company also said more clarity could be offered by BPSPs and not them.

RBI's direction to some fintechs as well

According to industry sources, some fintechs have also received the RBI direction to pause business payments made by commercial cards until further notice. They also fear that following the suspension of this facility even rental and tuition payments may be hit. Currently, fintech like Cred, Paytm and Nobroker allow rent and tuition fee payments through commercial, credit and debit cards.

It should be noted that companies mostly make their business payments through net banking/NEFT or RTGS for large transfers which are now 24x7. Fintech players like Enkash and Paymate allow process payments made through commercial cards for business needs like paying vendors and suppliers.

(With PTI inputs)

ALSO READ: RBI plans to replace OTPs with new technology to combat digital scams | Deets inside

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