Visa and Mastercard have reportedly paused intermediated commercial card payments in India following an order by the country’s financial market regulator.
The Reserve Bank of India (RBI) directed the firms to halt domestic transactions for business payment solution providers (BPSPs), Reuters reported Wednesday (Feb. 14).
“Visa received a communication from the RBI on February 8, in what appears to be an industry-wide request for information on the role of business payment solution providers (BPSPs) in commercial and business payments,” a Visa India spokesperson said in the report.
The spokesperson did not say why the RBI issued that directive, but said Visa is in discussions with the regulator to ensure compliance, according to the report.
Mastercard did not comment in the Reuters report and did not immediately reply to PYMNTS’ request for comment.
The Economic Times (ET) also reported Wednesday that the RBI has asked card networks to stop card-based commercial payments.
This move may have been driven by the RBI’s effort to halt a flow of money to merchants that have not been subjected to know your customer (KYC) processes, the ET reported, citing unnamed sources.
The bank accounts of these merchants may have been subjected to KYC processes, but the merchants themselves are not authorized to accept card payments as merchants, according to the report.
One unnamed FinTech founder who received a notice from the RBI said the regulator has directed that these payments be paused “until further notice,” per the ET report.
In another recent move by the regulator, the RBI announced in January that it was suspending business at Paytm Payments Bank after an audit turned up “persistent noncompliances and continued material supervisory concerns.”
Later revelations said the RBI’s move followed two years of warnings about the questionable relationship between Paytm and its banking business, but that those issues were not resolved.
The regulator was also reportedly worried about an overlap in management at the bank and the rest of Paytm, with the same group of executives making decisions on behalf of both companies, setting the stage for potential conflicts of interest.
The RBI has also cracked down on unsecured consumer loans, placing increased pressure on FinTech lenders.
The regulator announced in November that lenders had to change their capital requirements, saying it had seen an increase in delayed payments and wanted to prevent ballooning consumer debt and delinquencies.
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