RBI clarifies on Visa, Mastercard, says no issues with normal usage of business credit cards

RBI directive to Visa, Master Card: A day after the Reserve Bank of India (RBI) denied having issued directives to card networks Visa and Mastercard, for stopping their commercial card-based payments being made by corporates and businesses, the central bank on Thursday clarified that such payment system requires authorisation under the Payment and Settlement Systems (PSS) Act, 2007. 

The RBI also said that there were no restrictions on the normal usage of business credit cards.  

In a communique, without naming any card service company, the RBI said commercial payments were being routed through third-party intermediaries, as they did not comply with the central bank's payment and customer identification rules. 

“Under the provisions of Payment and Settlement Systems (PSS) Act, 2007, such payment system requires authorization under Section 4 of PSS Act, which has not been obtained in the instant case. The activity was, therefore, without legal sanction,” said the RBI. 

RBI clarification 

Even as media reports on Wednesday said RBI had asked card networks Visa and Mastercard to stop business payments via commercial cards, Republic Business had reported that no official directive was issued by the RBI.  However, on Thursday the central bank, in its communique said commercial payments routed through a third party raises major concerns. 

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“One (concern) is the large amounts of funds being pooled into an account of the intermediary and transactions being processed without adequate information on who the funds were going to,” said the RBI.  

The RBI said it asked the card network to keep all such arrangements "under abeyance" while it examined the matter. The central bank said it has not placed any restrictions on the normal usage of business credit cards.

On Wednesday, multiple media reports said the Reserve Bank of India has asked Mastercard and Visa to halt card-based commercial payments made by companies and small entities.  The card networks were said to have discontinued their services to all non-KYC-ed merchants and business outlets who might not be authorised to accept card payments until further notice. 

Earlier on Wednesday, a media report, citing the social media post of an independent journalist said RBI officials had met Visa representatives on February 8 and asked it to stop business payments via commercial cards. 

On January 31, the RBI directed Paytm Payments Bank Ltd  (PPBL) to stop accepting deposits or top-ups in customer accounts, wallets, FASTTags, and other instruments after 29 February citing large-scale non-compliance with regulations and supervisory concerns.