RBI direction to Mastercard is due to concerns over non-compliance with KYC norms.
Credit: Reuters File Photo
Mumbai: The Reserve Bank of India (RBI) has asked international payments major Visa and Mastercard to stop card-based commercial payments made by small and large businesses due to concerns over KYC compliance.
While Visa has acknowledged to a communication to this effect from the regulator on February 8, a response from Mastercard was awaited.
The development comes on the heels of the RBI initiating regulatory actions against Paytm Payments Bank.
According to industry sources, RBI directions to Visa and Mastercard have been issued due to concerns over non-compliance with 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.
In a statement , a Visa India spokesperson said 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 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."
The US company also said more clarity could be offered by BPSPs and not them.
According to the 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 suspension of this facility even rental and tuition payments may be hit. Currently fintechs like Cred, Paytm and Nobroker allow rent and tuition fee payments through commercial, credit and debit cards.
It can 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.