The Reserve Bank of India (RBI) has ordered a certain card network to stop “unauthorised payments” made using business cards.
More on the news
- The RBI said the card network was allowing businesses to make payments to entities that were not authorized to accept card payments and transactions did not comply with KYC norms.
- The intermediary in the above case pooled a large amount of funds into an account that was not a designated account under the Payments and Settlement System Act, 2007 (PSS Act).
What is a Card Network?
- Card networks: They are developed to utilize one mode of payment to pay for goods and services at multiple merchants and avoid carrying cash around.
- The authorised card networks tie up with banks / non-banks for the issuance of debit/credit/ prepaid cards.
- Card networks connect banks, merchants, and customers (card users) so that transactions can be carried out smoothly and securely.
- A fee is charged to the businesses by companies that process its debit and credit card transactions (known as Merchant Discount Rate (MDR)).
- Card Issuer: Banks typically dominate the choice of card networks that will be issued to their customers while providing a Debit or Credit Card and the customers have little choice in the matter.
- However, RBI has asked card issuers to provide customers the option to choose from multiple card networks from October 1, 2023.
- The RBI also said that card issuers should not enter into any arrangement or agreement with card networks that restrain them from taking the service of other card networks.
National Payments Corporation of India
- Genesis: NPCI is an initiative of RBI and Indian Banks’ Association (IBA) under the provisions of the PSS Act, 2007, for creating a robust Payment & Settlement Infrastructure in India.
- Statutory: It has been incorporated as a “Not for Profit” Company under the provisions of Section 25 of Companies Act 1956 (now Section 8 of Companies Act 2013).
- Products: Payment products developed by NPCI includes-
- Immediate Payment Service (IMPS),
- National Automated Clearing House (NACH),
- Aadhaar enabled Payment System (AePS),
- Unified Payments Interface (UPI) etc.
