RBI vide circular dated February 15, 2024 has observed 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.
Under this arrangement, 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, it was observed that this arrangement qualified as a payment system. Under the provisions of Payment and Settlement Systems (PSS) Act, 2007, such payment system requires authorization under Section 4 of PSS Act, which has not been obtained in the instant case. The activity was, therefore, without legal sanction.
All card networks without authorization are thereby clarified to be illegal.
