In a decisive move, the Reserve Bank of India (RBI) has intensified its efforts to curb peer-to-peer (P2P) credit card transactions conducted through third-party service providers. This action follows the RBI’s recent prohibition on visas for specific commercial business-to-business (B2B) credit card transactions.
Reports indicate that the central bank’s crackdown stems from the discovery of retail customers utilizing unaffiliated third-party apps to pay for rent and tuition through credit cards. Fintech platforms, acting as intermediaries, facilitate these payments by allowing clients to use credit cards for approved merchant accounts. In return for a commission, these third parties swiftly transfer the funds to the recipient’s bank account, such as a landlord in the case of rent payments.
A senior RBI official clarified that credit card transactions are explicitly intended for use between customers and merchants (P2M). Any transfer of funds through a third-party escrow account violates regulatory standards and will not be permitted.
According to another official, the RBI is closely scrutinizing money routed through third-party channels, particularly highlighting rent payments as one of the largest categories falling under this scrutiny. The central bank emphasizes that credit cards serve as physical or virtual payment devices with pre-approved revolving credit limits, intended for making purchases or obtaining cash advances directly between customers and merchants.
Presently, fintech companies like CRED, OneCard, and NoBroker offer this service. Notably, Amazon Pay and Paytm, which previously accepted rent payments through credit cards, now restrict eligibility to registered housing societies and business agreements with merchant bank accounts.
