Sign In
Learn bits
Economy
Mahesh

16/02/24 22:40 PM IST

RBI put restraints on a certain card network

In News
  • The Reserve Bank of India (RBI) has ordered a certain card network to stop “unauthorised payments” made using business cards. It did not name the card network.
Card network
  • Card networks connect banks, merchants, and customers (card users) to one another so that transactions can be carried out smoothly and securely.
  • Card networks are operating in the background every time a customer uses her card to make a payment.
  • There are five authorised card networks in India: Visa, Mastercard, RuPay, Diners Club, and American Express
  • RBI said only one card network has operationalised the arrangement that enables corporates to make unauthorised card payments via business cards in the country.
Why this caution?
  • The RBI said that it had “noticed” that a card network had an arrangement that enabled businesses to make card payments through certain intermediaries to entities that did not accept card payments.
  • Thus, the intermediary was accepting card payments from corporates for their commercial payments, and was then remitting the funds via IMPS (Immediate Payment Service), RTGS (Real-Time Gross Settlement), or NEFT (National Electronic Fund Transfer) to non-card accepting recipients.
  • A “close scrutiny”, the RBI said, revealed that “such arrangement qualified as a payment system”.
  • Under Section 4 of the PSS Act, such a payment system requires authorisation, which had not been obtained in this case. “The activity was, therefore, without legal sanction.
Concerns
  • First, the intermediary in such an arrangement pooled a large amount of funds into an account that was not a designated account under the PSS Act.
  • Second, transactions processed under this arrangement did not comply with the ‘originator and beneficiary information’ requirements, as stipulated under the ‘Master Direction on KYC’ issued by the RBI.
Measures by RBI
  • The RBI has advised the card network to keep all such arrangements in abeyance until further orders.
  • It has, however, clarified that no restriction has been placed with respect to the normal usage of business credit cards.
  • BPSPs offer business-to-business payment services to corporates using credit cards. It enables corporates to improve cash flow.
  • Visa also said that “any transaction authorised prior to the communication would be settled in the ordinary course of business”, and asked BPSPs to “send us a confirmation at the earliest that such merchants/ merchant IDs have been blocked and transactions ceased.
Source- Indian Express

More Related Current Affairs View All

08 Sep

Rajasthan’s coaching centre Bill

'The Rajasthan Coaching Centres (Control and Regulation) Bill, 2025, is a significant piece of legislation passed by the Rajasthan Assembly to regulate and oversee the state's burg

Read More

28 Aug

IADT-1

'Recently, the Indian Space Research Organisation (ISRO) successfully carried out its first Integrated Air Drop Test (IADT-1), a crucial milestone in the preparation for the countr

Read More

28 Aug

H-1B visa changes

'H-1B visa changes 2025: United States Commerce Secretary Howard Lutnick called the popular H-1B visa program a “scam”, saying that American businesses should be focuse

Read More

India’s First Ai-Driven Magazine Generator

Generate Your Custom Current Affairs Magazine using our AI in just 3 steps