The Reserve Bank on Thursday asked card network Visa to stop making payments through intermediaries to entities which do not accept card payments, saying a large amount of funds are involved in the activity without legal sanction, according to sources.

As per information available, only one card network has operationalised this arrangement in the country so far, the Reserve Bank of India (RBI) said without naming Visa.

However, sources said the card network is Visa.

Visa did not immediately offered any comments, but indicated it may come with one later.

The central bank said as the matter is under detailed examination, the card network has been advised to keep all such arrangements under abeyance, till further orders.

"It has come to the notice of RBI that a card network had an arrangement that enables businesses to make card payments through certain intermediaries, to entities that do not accept card payments," the central bank said in a statement.

Under this arrangement, the RBI said the intermediary accepts card payments from corporates for their commercial payments and then remits the funds via IMPS/RTGS/NEFT to non-card accepting recipients.

On closer scrutiny, the RBI found that the arrangement qualified as a payment system and under the provisions of Payment and Settlement Systems (PSS) Act, 2007, such payment system requires authorization, which has not been obtained in the instant case.

"The activity was, therefore, without legal sanction," RBI said.

The central bank further said the arrangement has raised concerns as the intermediary in the arrangement pooled large amount of funds into an account which is not a designated account under PSS Act.

"Transactions processed under this arrangement did not comply with the originator and beneficiary information requirements, as stipulated under Master Direction on KYC issued by the Reserve Bank," the RBI said.

The central bank also clarified that it has not placed any restriction with respect to normal usage of business credit cards.

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