RBI Action on Visa-Mastercard: The Reserve Bank was suspecting that fraud was being done through commercial card payments and the money from the credit line was being diverted…
International payment merchants like Visa and MasterCard have suffered a major setback in India. Taking action against Visa and MasterCard, the Reserve Bank has asked them to stop business payments through cards. After the action, senior officials of both the payment merchants have met the Central Bank officials. Visa and MasterCard dominate in card payments in terms of value.
Instructions to suspend such payment from the card
The Reserve Bank took this action on 8 February. The Reserve Bank has asked Visa and MasterCard to suspend business payments (commercial payments) made by companies through cards. The Reserve Bank has asked them to suspend all transactions of Business Payment Solution Providers (BPSP) till further notice.
Reserve Bank became suspicious of these things
The Reserve Bank has not yet told the reason behind this action. However, it is being said in the news that using the card, payments were being made to such merchants whose KYC has not been done. This thing was bothering RBI. Apart from this, the Reserve Bank was suspecting fraud and money laundering in some big transactions.
Such cards are available under credit line
Actually, banks issue such cards to big corporates. These are available to corporates under the credit lines they get from banks. Big corporates use these cards to make payments to small companies. RBI found some cases in which, using the system of commercial payments through cards, big corporates paid the money from credit lines received from banks to small companies whose KYC was not done. This made RBI suspicious that the card route was being used for money laundering.
Met with RBI officials
Some media reports are claiming that after the RBI action, top executives of both top payment merchants Visa and MasterCard met RBI officials on Wednesday. According to a report in Business Standard, top executives of Visa and MasterCard wanted to know what kind of business model to follow in the case of corporate card-to-business account money transfers. For this he met top officials of RBI.
