RBI asks Visa, Mastercard to halt commercial card payments amid KYC concerns

The Reserve Bank of India (RBI) has directed global payment giants Visa and Mastercard to suspend card-based commercial transactions by both small and large businesses due to mounting apprehensions over Know Your Customer (KYC) compliance.

Visa has confirmed receipt of the regulatory communication dated February 8, while awaiting a response from Mastercard.

This directive from the RBI follows recent regulatory actions initiated against Paytm Payments Bank, indicating a broader crackdown on non-compliance within the payments sector.

Industry insiders reveal that the central bank's intervention with Visa and Mastercard stems from observed lapses in adhering to KYC norms.

Transactions conducted at various business establishments, potentially lacking authorisation for commercial card payments, have been instructed to be temporarily ceased.

Responding to queries, a spokesperson for Visa India informed PTI that they had indeed received communication from the RBI on February 8, highlighting an industry-wide request for information regarding the role of Business Payment Solution Providers (BPSPs) in commercial transactions. The directive included instructions to suspend all BPSP transactions until further notice.

Visa said that BPSPs operate under RBI regulations and licensing, specifically under the PA-PG (Payment Aggregators - Payment Gateways) guidelines. The company affirmed active engagement in discussions with the RBI and ecosystem partners to ensure regulatory compliance.

Furthermore, Visa clarified that greater clarity on the matter may be provided by BPSPs themselves rather than by the company.

Sources within the industry disclosed that several fintech firms have also received directives from the RBI to pause commercial card payments until further instructions.

Concerns linger among industry players regarding the potential impact on various transactions, including rental and tuition fee payments. Currently, fintech platforms like Cred, Paytm, and Nobroker facilitate such payments using commercial, credit, and debit cards.

It's worth noting that businesses predominantly rely on net banking/NEFT or RTGS for large transfers, which operate round the clock.

Fintech entities such as Enkash and Paymate facilitate commercial card payments for various business requirements, including vendor and supplier payments.