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Indian finance ministry asks RBI to conduct monthly meetings with fintechs on regulatory issues

IndianStartupNewsIndianStartupNews · 1y ago
Indian finance ministry asks RBI to conduct monthly meetings with fintechs on regulatory issues
Medial

Finance Minister Nirmala Sitharaman has urged the Reserve Bank of India (RBI) to hold monthly meetings with fintech companies in order to address regulatory concerns and foster a collaborative environment. This move comes after recent regulatory actions taken against Paytm Payments Bank, highlighting the need for better communication and understanding between regulators and fintech firms. In a meeting with fintech stakeholders, Sitharaman stressed the importance of regulatory compliance while supporting innovation. The government also outlined action points to support the fintech sector, including simplifying KYC processes and addressing cybercrime issues.

RBI asks Visa, Mastercard to suspend card-based commercial payments

EntrackrEntrackr · 1y ago
RBI asks Visa, Mastercard to suspend card-based commercial payments
Medial

In what appears to be another blow to fintech companies, India’s central bank RBI has reportedly asked Visa and Mastercard to bar card-based commercial payments made by companies. It is worth noting that a few fintech companies, such as Enkash, Karbon, and Paymate, allow payments through cards for purposes like payments to suppliers or vendors. Companies usually make business payments through net banking or RTGS, as pointed out by the Economic Times. The development was first reported by Arti Singh. Visa in a message to its partners said that the company has been directed by the regulator to suspend all Business Payment Service Provider (BPSP) transactions until further notice. “Hence, we kindly ask that all BPSP merchants/merchant is registered by yourselves with Visa be immediately suspended till advised by us to the contrary. For avoidance of doubt, any transaction authorized prior to the communication would be settled in the ordinary course of business. We kindly ask that you send us a confirmation at the earliest that such merchants/merchant IDs have been blocked and transactions ceased. Failure to adhere to these instructions could result in regulatory sanction and non-compliance assessment under the Visa rules,” the message is quoted as saying. As of now, it is not clear why the RBI has made this move. According to the ET report, the central bank has been unhappy with payments to merchants who have not followed KYC norms. The report further pointed out that some of the merchants are not eligible to accept card payments. That said, Indian fintech companies have had a hard time in the last couple of years following the regulatory changes. For instance, a popular BNPL firm Zestmoney shut down its operations last year after the RBI issued a series of guidelines and directives for BNPL firms. One of the first major blows came in June 2022 when the Reserve Bank of India (RBI) prohibited all non-bank prepaid instrument issuers from loading instruments with credit lines. This essentially meant these firms could no longer extend credit lines through the prepaid payment instruments, which includes cards and wallets. Until then, BNPL firms partnered with the banks to offer self-branded cards and allowed end users to use them for credits as and when required. Just a few months later RBI’s guidelines for the first loan default guarantee (FLDG) dealt another blow to the BNPL firms. Separately, fintech giant Paytm has been facing similar challenges as the RBI barred Paytm Payments Bank (PPBL) from accepting fresh deposits and continuing banking services after February 29 due to non-compliance. The move, taken under section 35A of the Banking Regulation Act, 1949, also affected Paytm’s other services such as FASTags. Since the announcement, Paytm’s shares have continued to nosedive on the stock exchange. At the time of writing, its shares further crashed by 9%, slipping under the Rs 350 mark, reaching a 52-week low.

RBI clarifies the move to halt business payments through commercial cards

EntrackrEntrackr · 1y ago
RBI clarifies the move to halt business payments through commercial cards
Medial

The Reserve Bank of India (RBI) issued a clarification on Wednesday regarding the decision to halt business payments through commercial cards. In a press release, the central bank stated that a card network had an arrangement permitting 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,” it added. The RBI observed that this arrangement qualified as a payment system, and needed authorization under Section 4 of the Payment and Settlement Systems (PSS) Act, 2007. And in such cases, this authorization was not obtained. Such activity raised concerns like pooling large amounts of funds into an account which is not authorized under the PSS Act. Also, the bank was concerned that transactions happening under such an arrangement did not adhere to the “originator and beneficiary information requirements, as stipulated under Master Direction on KYC issued by the Reserve Bank.” “As the matter is under detailed examination, the Card Network has been advised to keep all such arrangements under abeyance, till further orders. It is clarified that the Reserve Bank has not placed any restriction with respect to normal usage of business credit cards,” the bank added. Earlier, Visa and MasterCard had reached out to the central bank seeking clarification regarding the move. It is worth noting that businesses usually make business payments through the net banking systems, including RTGS. However, a few fintech companies, in partnership with the card companies, began facilitating payments through commercial cards. These payments could be for purposes such as payment to suppliers or vendors. Some companies operating in this space are Enkash and Paymate. Paymate, which has in-principle approval from the RBI for a payment aggregator license, told the Economic Times that they are making alternate arrangements compliant with regulatory norms to ensure seamless payments on their platform. “…Such regulatory hurdles can be avoided by adhering to the regulator’s rules and guidelines through innovative KYC solutions. It becomes imperative for financial institutions and fintech players to ensure that all financial transactions taking place are within the regulatory ambit and that no fraudulent or unauthorized transactions are occurring on the digital platform while maintaining the security posture,” Signzy CEO and cofounder Ankit Ratan said in a statement.

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