Page 11 - BANKING FINANCE MARCH 2024

RBI CORNER

perform due diligence of customers commercial and business payments. ins with the RBI on multiple occasions
more effectively and understand their That communication included the di- - in the seven years of its existence, the
needs better," Singh said. rection that we hold all BPSP transac- bank has been penalised over compli-
KFS provides critical information about tions in abeyance," the company said ance issues at least five times by the
in a statement. RBI.
the pricing of loans and other charges
levied on the customers helping bor- "It is important to note that BPSPs are While the central bank's recent crack-
rowers make an informed decision regulated and licensed by RBI under down has made users, merchants and
about their borrowings. the payment aggregator/payment its investors anxious, the RBI is yet to

Ajit Velonie, senior director at Crisil, gateway guidelines. Visa is proactively give specific details on what necessi-
said the RBI's move brings consistency engaged and continues to be in discus- tated the action and what the sever-
to norms across asset classes. "The sions with RBI and our ecosystem part- ity of violation at the payments bank
mandate will be specifically relevant ners to ensure compliance," the state- was, adding to the travails of users and
for shorter-tenure loans which have ment added. merchants.
relatively higher upfront processing Banks said that RBI's concerns Paytm Payments Bank has been
fees but competitive interest rates," stemmed from the fact that the issu- barred from offering almost all of its
Velonie said. ance was happening through entities key services - accepting deposits or
that are not authorised to issue cards. top-ups in any customer account, pre-
RBI bars fintechs from is- Secondly, business credit cards must paid instruments, wallets, FASTags,
limit their usage for specified transac- National Common Mobility Card
suing biz credit cards on tions. The central bank was also wor- (NCMC), etc., after February 29 in the
KYC worries ried that these instruments, if issued by wake of "persistent non-compliances
non-banks to facilitate payments to and material supervisory concerns".
RBI has asked payment networks Visa
those merchants not officially The payments bank had over 7 lakh
and Mastercard to stop facilitating
onboarded to the card acceptance point of sale (PoS) terminals, 3.52 crore
business credit card issues by fintech
network, could bypass KYC norms. UPI QR codes and 3.23 crore debit
aggregators, also known as business
cards as of December 2023, RBI data
payment solution providers.
Since 2017, Paytm pay- shows. According to the bank's
Business credit cards, unlike consumer website, it has over 30 crore wallets
credit cards, are issued to businesses. ments bank penalised at and 3 crore bank accounts. It has over
These are used to make vendor pay- least five times by RBI 10 crore KYC customers, with 4 lakh
ments and act as a substitute for work- users added every passing month. The
ing capital for the companies. "No fear. No greed. No entitlement. bank is the largest issuer of FASTag,
India's most sincere bank is here". That
Historically, banks have been issuing with over 80 lakh units issued so far.
is how Paytm Payments Bank markets
these cards to corporates. In recent Allegations of money laundering and
itself.
years, fintechs have issued such cards, foreign exchange violations have also
onboarding vendors to enable them to On January 31, citing non-compliance, been made against the company. How-
accept payments made on credit card the RBI all but shut down operations ever, Paytm has denied these accusa-
networks. of the bank by ordering it to stop ac- tions. "We are not in a position to com-
cepting new deposits in its accounts
When contacted, Visa confirmed the ment on the issue as Paytm Payments
beginning March.
development. "Visa received a com- Bank Limited is under the supervisory
munication from RBI, Feb 8 in what The payments bank, which com- engagement of the regulator," a
appears to be an industry-wide request menced operations in May 2017, is not Paytm Payments Bank spokesperson
for information on the role of BPSPs in new to controversy and has had run- said.

10 | 2024 | MARCH | BANKING FINANCE