The Reserve Bank of India (RBI) has instructed Visa and Mastercard to cease card-based commercial payments by businesses, citing concerns over Know Your Customer (KYC) compliance. This directive extends to transactions made by both small and large enterprises, with a focus on ensuring adherence to regulatory norms.
Regulatory Intervention and Industry Response
- RBI’s directive follows regulatory actions against Paytm Payments Bank and concerns over KYC non-compliance.
- Visa has acknowledged receiving communication from the RBI on February 8, indicating a broader industry request for information regarding the role of Business Payment Solution Providers (BPSPs) in commercial payments.
- Mastercard’s response to the directive is pending.
Impact on Business Payment Ecosystem
- Transactions made at unauthorized business outlets are to be temporarily halted, affecting various sectors relying on commercial card payments.
- Fintech companies, including Cred, Paytm, and Nobroker, which facilitate rental and tuition fee payments through commercial cards, are likely to be impacted.
- The suspension of this facility may also affect essential business operations such as vendor and supplier payments.
Industry Engagement and Compliance Efforts
- Visa asserts proactive engagement with the RBI and ecosystem partners to ensure compliance with regulations.
- Fintech players such as Enkash and Paymate, which process business payments through commercial cards, are also subject to the RBI’s directive.
SEBI Abolishes 1% Security Deposit Manda...
India Launches First AI Data Bank to Boo...
Bima Sugam: A Step Towards a Digital Ins...
