RBI strictly taking action on P2P credit card transactions

The Reserve Bank of India (RBI) is reportedly clamping down on peer-to-peer (P2P) credit card payments made through third-party service providers, following its prohibition on visas from conducting specific commercial business-to-business (B2B) credit card transactions.

This comes after the central bank discovered cases of retail customers paying for rent and tuition with credit cards via unaffiliated third-party apps.

These outside parties, typically fintechs, let clients pay with credit cards to their approved merchant accounts. In return for a commission, they then instantly transfer the funds to the recipient’s bank account (such as a landlord in the case of rent payments).

According to a senior official, credit card transactions are exclusively intended for use between customers and merchants (P2M). It is against the rules and will not be permitted for money to be transferred through a third-party escrow account.

Regulatory standards define a credit card as a physical or virtual payment device that can be used to make purchases or obtain cash advances, and that is issued with a pre-approved revolving credit limit.

Another official stated that money that is being routed through a third party, in any unauthorized way, is attracting scrutiny, noting that rent payments are one of the largest categories under this.

Currently, this service is offered by fintech companies like CRED, OneCard, and NoBroker. Previously, rent payments with credit cards were accepted by Amazon Pay and Paytm, but as of right now, only registered housing societies and business agreements with merchant bank accounts are eligible.