Visa and Mastercard, two major international payment merchants, have received a significant setback in India. The Reserve Bank has directed Visa and Mastercard to halt business payments via cards.
🔥 Action Taken to Suspend Card Payments
Following this action, senior officials from both payment merchants have met with officials from the Central Bank. Visa and Mastercard wield dominance in card payments based on value.
🚫 Instructions to Suspend Payments
The Reserve Bank initiated this action on February 8. It directed Visa and Mastercard to suspend business payments (commercial payments) made through cards by companies. Until further notice, the Reserve Bank has instructed them to suspend all transactions of Business Payment Solution Providers (BPSP).
❓ RBI’s Doubts Behind These Actions
The Reserve Bank has not yet disclosed the reasons behind this action. However, reports suggest that payments were being made through cards by merchants who did not have KYC compliance. RBI found this concerning. Additionally, the Reserve Bank had suspicions about fraud and money laundering in some significant transactions.
💳 Usage of Credit Lines for Such Cards
Cards like these are issued by banks to large corporates. These corporates receive them under the credit lines obtained from banks. Large corporates use these cards to make payments to smaller companies. RBI became suspicious that, in some cases, large corporates used the credit line received from banks to pay smaller companies without KYC compliance. This raised concerns about the misuse of the card route in money laundering.
🔍 Meeting with RBI Officials
According to some media reports, after RBI’s action, top executives of both Visa and Mastercard met with RBI officials on Wednesday. According to a Business Standard report, top executives of Visa and Mastercard wanted to understand how to follow what type of business model in corporate card-to-business account money transfer cases. Hence, they met with senior RBI officials for the same purpose.
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