RBI directs Visa, Mastercard to suspend business payments via commercial cards
The exact reason behind RBI's direction is not clear. However, as per reports, the regulator has concerns over the movement of funds through card transactions to merchants who haven't undergone Know Your Customer (KYC) procedures.
The Reserve Bank of India (RBI) has instructed card payment gateways Visa and Mastercard to suspend all business payment solution providers' (BPSPs) transactions involving card-based commercial payments.
"Visa received a communication from the RBI on Thursday, February 8 in what appears to be an industry-wide request for information on the role of business payment solution providers in commercial and business payments. That communication included the direction that we hold all BPSP transactions in abeyance," Visa said in a statement to Yourstory.
"It is important to note that BPSPs are regulated and licensed by the RBI under the PA PG guidelines. Visa is proactively engaged and continues to be in discussions with the RBI and our ecosystem partners to ensure compliance," the statement added.
This development was first reported by independent journalist Arti Singh. Mastercard has not issued a statement yet while EnKash, one of the BPSPs, declined to comment on the matter.
The exact reason behind RBI's directive is not clear. However, sources reportedly told The Economic Times, that the regulator had concerns over the movement of funds through card transactions to merchants who haven't undergone Know Your Customer (KYC) procedures. Although their bank accounts may be KYC-compliant, these merchants are often not authorised to accept card payments, the report said.
Traditionally, businesses make payments through net banking or bulk transfers such as RTGS (Real Time Gross Settlements) managed by the RBI. However, fintech companies and card networks have introduced processes enabling businesses to pay vendors and suppliers using commercial cards like Enkash and Paymate.
In what has been a turbulent month for fintechs, RBI also barred Paytm Payments Bank from accepting deposits or top-ups in any customer accounts, wallets, FAST Tags, and other instruments after February 29.
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Edited by Affirunisa Kankudti