RBI Halts Visa and Mastercard Commercial Card Payments Over KYC Concerns

RBI Regulatory Actions Extend to Paytm Payments Bank Amidst Visa, Mastercard Commercial Card Payment Halt.

The Reserve Bank of India (RBI) has issued a directive to major global payment companies, Visa and Mastercard, instructing them to suspend card-based commercial transactions for both small and large businesses. This decision comes as a response to growing concerns regarding compliance with Know Your Customer (KYC) regulations.

KYC compliance ensures that financial institutions and businesses verify the identity of their customers to prevent illegal activities such as money laundering and fraud. The RBI’s directive aims to address these apprehensions and ensure that card-based commercial transactions adhere to KYC requirements.

Visa has officially confirmed receiving the regulatory communication from the Reserve Bank of India (RBI) dated February 8. Meanwhile, the company is awaiting a response from Mastercard regarding the same matter.

The directive issued by the Reserve Bank of India (RBI) to Visa and Mastercard follows recent regulatory actions taken against Paytm Payments Bank. This move suggests a broader crackdown by the RBI on non-compliance within the payments sector.

Industry insiders have disclosed that the Reserve Bank of India’s intervention with Visa and Mastercard is a response to observed lapses in adhering to Know Your Customer (KYC) norms. The central bank has instructed the temporary cessation of transactions conducted at various business establishments, potentially lacking authorization for commercial card payments.his directive underscores the RBI’s commitment to ensuring compliance with regulatory standards and safeguarding the integrity of the financial system.

Responding to queries, a spokesperson for Visa India informed PTI that they had indeed received communication from the RBI on February 8. The communication highlighted 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. This indicates a proactive step by the RBI to address concerns and ensure compliance within the payments sector.

Visa clarified that Business Payment Solution Providers (BPSPs) operate under RBI regulations and licensing, specifically governed by the PA-PG (Payment Aggregators – Payment Gateways) guidelines. The company affirmed its active engagement in discussions with the RBI and ecosystem partners to ensure regulatory compliance. This statement underscores Visa’s commitment to working closely with regulators and industry stakeholders to uphold regulatory standards and ensure the integrity of the payment ecosystem.

Visa further clarified that greater clarity on the matter may be provided by Business Payment Solution Providers (BPSPs) themselves, rather than by the company. Sources within the industry revealed that several fintech firms have also received directives from the RBI to pause commercial card payments until further instructions. These developments highlight the ongoing regulatory scrutiny in the payments sector and the need for compliance with RBI guidelines.

Concerns persist among industry players regarding the potential impact on various transactions, including rental and tuition fee payments. Fintech platforms such as Cred, Paytm, and Nobroker currently facilitate these payments using commercial, credit, and debit cards.

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