The Reserve Bank of India (RBI) has asked international payment majors Visa and Mastercard to stop card-based commercial payments by small and large businesses because of concerns over KYC compliance.

While Visa acknowledged a communication to this effect from the regulator on February 8, a response from Mastercard was awaited.

The development comes from the RBI initiating regulatory actions against Paytm Payments Bank.

According to industry sources, RBI directions to Visa and Mastercard have been issued due to concerns over non-compliance with KYC norms.

Transactions done at other business outlets which may not be authorised to accept commercial card payments have been asked to be temporarily halted.

In a statement, a Visa India spokesperson told PTI that “they have 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. That communication included the direction that we hold all BPSP transactions in abeyance”.

Visa further said BPSPs are regulated and licensed by the RBI under the PA-PG (payment aggregators — payment gateways) guidelines. “We are proactively engaged and continue to be in discussions with the RBI and our ecosystem partners to ensure compliance.”

The US company also said more clarity could be offered by BPSPs rather than them.

According to industry sources, some fintechs have also received the RBI’s
direction to pause business payments made by commercial cards until any further notice.

They also fear that following the suspension of this facility even rental and tuition payments may be hit.

Currently, fintechs like Cred, Paytm and Nobroker allow rent and tuition fee payments through commercial, credit and debit cards.

It can be noted that companies mostly make their business payments through net banking/NEFT or RTGS for large transfers which are now 24x7.

Fintech players such as Enkash and Paymate allow process payments made through commercial cards for business needs such as paying vendors and suppliers.

Paytm tanks

Shares of One97 Communications Ltd (OCL), the owner of the Paytm brand, continued on its southward trajectory on Wednesday as it sank 10 per cent on reports of ED action.

The enforcement directorate (ED) has reportedly started a preliminary inquiry into Paytm Payments Bank (PPBL) to examine possible violations of Fema (Foreign Exchange Management Act) rules.

The ED is understood to have written to the RBI seeking more details on the action taken by the banking regulator against PPBL, an associate of OCL Paytm Payments Bank Ltd

A Reuters report said that the agency is examining overseas transactions by PPBL.

Responding to clarification sought by the exchanges on the report, One97 said its associate does not undertake outward foreign remittance.

“OCL, its subsidiaries and its associate, PPBL have over time been receiving notices and requisition for information, documents and explanations from the authorities, including ED, concerning the customers that may have done business with the respective entities, and provided the required information, documents and explanations to the authorities,” OCL said.

“The company and its associate have continued to provide such information, documents and explanations to the authorities as is being required by them.’’