Commercial cards are used by corporates for making purchases on the company’s behalf. This gives them interest free loans for a period of 30-40 days, which helps manage working capital.
There are five card networks in India: Visa, Mastercard, RuPay, Diners Club, AmEx. The network in question has allegedly allowed businesses to make payments through intermediaries to entities that cannot accept card payments.
While the RBI has not officially announced the reasons for the directive, fintech companies active in the segment said such transactions are being done at outlets which are not authorised to accept such payments.
The Reserve Bank of India has reportedly asked Visa and Mastercard to stop card-based commercial payments made by corporations and small enterprises. This move comes after RBI's ban on Paytm Payments Bank. Find out more about the reasons behind the decision and its impact on fintechs and non-KYC-ed merchants.