RBI Restrictions on P2P Credit Card transactions – Reserve Bank of India (RBI) is putting restrictions on P2P Credit Card transactions via payment apps. The P2P lending platforms are facilitating the payments by retail customers using credit cards. This comes after RBI’s crackdown against Paytm and barring Visa from undertaking certain commercial business-to-business (B2B) credit card transactions. Earlier, the central bank has found instances of retail customers using credit cards to pay rent and tuition fees through third party apps.
Also Read – Top Best Credit Card for EMI in 2024
The latest fintech players that will be on RBI radar include companies such as NoBroker, Cred and OneCard. These fintechs allow such third party payments. Earlier, Paytm and Amazon Pay also had similar service. However, now rent can be paid using Amazon Pay or Paytm only when housing societies have merchant bank account. These fintech platforms charge commission of 1.5-3 per cent on such payments apart from the usual GST.
The peer-to-peer (P2P) credit card payments made via third-party service providers. These third-party players, usually fintech, allow customers to make a credit card payment to their authorized merchant account. They then instantaneously transfer the money to the bank account of the recipient (for instance a landlord in case of rent payments) in exchange for a commission. “Credit card transactions are only meant to be between merchants and customers (P2M). If funds are being routed through an escrow account operated by a third party, it is bypassing the regulations and will not be allowed,” a senior official from RBI said.
As per credit card issuance norms, an individual is not allowed to make his rent payments to her/his landlords unless the landlord has a merchant payment account. But these P2P platforms are allowing credit card payments. This means that third party apps are being used by retail customers to pay rents or their tuition fees. Funds being routed via third party apps via an ‘escrow account’ is a clear bypassing of current norms, which will not be allowed.
