India's central bank has asked Visa and Mastercard to stop card-based business-to-business payments such as rents or money transfer to vendors routed through third party fintech firms, according to two sources familiar with the matter.
The central bank has not specified why they have placed these restrictions, the sources said, adding that the impact would only be on commercial payments routed through third parties and not on all corporate card payments.
A set of fintech firms in India operate in a category called "business payment solution providers" (BPSPs), which facilitate payments to merchants that do not otherwise accept card payments in return for a fee.
Only a small set of payments, which were routed via fintech firms, will be impacted, said one of the sources, who is an executive at one of the card networks.
The central bank has for now asked Visa and Mastercard to suspend such transactions, the sources said.
Regular payments made to businesses via corporate cards will not be impacted, the person said.
"Visa received a communication from the RBI on February 8, in what appears to be an industry-wide request for information on the role of business payment solution providers (BPSPs) in commercial and business payments," a Visa India spokesperson said.
"That communication included direction that we hold all BPSP transactions in abeyance," the statement said.
Mastercard did not respond to a request for comment.
The Reserve Bank of India (RBI), India's central bank which also regulates the country's payment systems, did not respond to an email seeking comment.
Earlier in the day, the Economic Times reported that the RBI asked leading card networks, including Visa and Mastercard, to halt such card payments.
Visa, in its response, said it was "proactively engaged and continues to be in discussions with the RBI and our ecosystem partners to ensure compliance."
