Orders limiting business transactions channeled through middlemen via a card network were released by the Reserve Bank of India (RBI) on Thursday.
The intermediary with an arrangement with the card network was told by the central bank that it lacked authorization to operate under the Payment and Settlement Systems (PSS) Act, without mentioning the card network. The regulator decided to halt the agreement indefinitely as a result of this.
The central bank also mentioned that the card network has a deal that allows companies to pay with cards to companies that don’t use them, by using specific middlemen.
The RBI clarified that as part of the agreement, corporates can pay with cards to the intermediary for their commercial payments. It then transfers the money to receivers who do not take credit cards using the national electronic funds transfer (NEFT), real-time gross settlement (RTGS), and prompt payment service (IMPS).
According to the RBI, just one card network in the nation has operationalized this arrangement as of yet. The central bank has also expressed concerns that transactions processed under the aforementioned arrangement did not adhere to the regulator’s Master Direction on KYC (Know Your Customer) regarding originator and beneficiary information requirements.
In contrast to retail cards, which are intended for personal use, businesses utilize commercial cards for payments.
In the meanwhile, a business payment solution provider (BPSP) serves as a middleman, facilitating business-to-business (B2B) payments for suppliers who do not take credit cards for things like rent, bills, and payroll, among other things.