RBI Halts Unauthorized Card Payment Arrangement

Mumbai, Feb 15 (PTI) The Reserve Bank on Thursday restrained a card network which enabled businesses to make card payments through certain intermediaries to entities that do not accept card payments, as the activity was without "legal sanction".

The Reserve Bank, however did not name the card network or the intermediaries.

As per information available, only one card network has operationalized this arrangement in the country so far, the central bank added.

"As the matter is under detailed examination, the card network has been advised to keep all such arrangements under abeyance, till further orders," the Reserve Bank said.

RBI said it has come to its notice that a card network had an arrangement that enables businesses to make card payments through certain intermediaries, to entities that do not accept card payments.

"Under this arrangement, the intermediary accepts card payments from corporates for their commercial payments and then remits the funds via IMPS/RTGS/NEFT to non-card accepting recipients," the RBI said.

On closer scrutiny, the RBI said it was observed that this arrangement qualified as a payment system and under the provisions of Payment and Settlement Systems (PSS) Act, 2007, such payment system requires authorisation which has not been obtained in the instant case.

"The activity was, therefore, without legal sanction," it said.

The arrangement, the RBI said has also raised concerns as the intermediary in the arrangement pooled large amount of funds into an account which is not a designated account under PSS Act.

"Transactions processed under this arrangement did not comply with the originator and beneficiary information requirements, as stipulated under Master Direction on KYC issued by the Reserve Bank," it said.

Further, the central bank clarified that it has not placed any restriction with respect to normal usage of business credit cards.