RBI asks card network to halt commercial card payments

The Reserve Bank of India (RBI) has asked an unnamed card network to halt card-based business-to-business (B2B) payments.

The regulatory order comes after the regulator noticed commercial payments being routed through unauthorized third-party intermediaries.

“It has come to our 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,” RBI said in a press release.

Under this arrangement, the intermediary accepts card payments from companies for their commercial payments and then remits the funds via bank transfers to non-card accepting recipients, the regulator said.

RBI said that it found that this arrangement qualified as a payment system, but was without legal sanction as no authorization was obtained under Section 4 of the Payment and Settlement Systems (PSS) Act, 2007.

Visa, meanwhile, said on Thursday that the Reserve Bank had last week directed it to halt all domestic transactions for business payment solution providers, the Press Trust of India reported.

BPSPs enable business-to-business card payments to vendors or suppliers who do not accept cards.

The RBI’s directive will affect only those commercial card payments processed through BPSPs, not all commercial card transactions.

Major card network service providers Visa India and Mastercard did not respond to emailed queries.

Global card networks, including Visa and Mastercard, are reaching out to RBI seeking clarifications on business payments made through their networks, The Economic Times reported this week, citing unidentified industry officials.