The Reserve Bank of India (RBI) has instructed intermediaries to cease card payments from entities that do not accept card payments directly. This directive encompasses significant amounts of funds without legal approval.
As per available information, the RBI mentioned Visa without explicitly naming it, stating that only one card network in the country has implemented this system so far. However, it has not issued any statement regarding Visa specifically.
The central bank stated that since a thorough investigation is underway, all arrangements regarding card networks have been advised to be suspended until further orders. The RBI noted that it has come to its attention that a certain arrangement in one card network enables entities that do not accept card payments to accept payments through intermediaries.
Under this arrangement, intermediary companies accept commercial payments through cards and then transfer the funds to non-card accepting recipients via IMPS/RTGS/NEFT.
The RBI stated that upon careful examination, it was found that this arrangement qualifies as a payment system and under the provisions of the Payment and Settlement Systems (PSS) Act, 2007, such payment systems require authorization from the regulator, which was not the case in this matter. Therefore, this process was without legal approval.
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