Online transactions via credit cards should be through bank in India & in rupee, says RBI
Updated: Aug 23, 2014 04:09:24pm
Mumbai, Aug 23 (KNN) The Reserve Bank of India (RBI) has directed that settlement of transactions using credit cards online, also known as card not present (CNP) transactions, for purchase of goods and services within the country will have to be done through a bank in India and the payments must be made in rupee.
The apex bank said in a notification, “It has come to our notice that despite the above clarifications there are instances of card not present transactions being effected without the mandated additional authentication/validation even where the underlying transactions are essentially taking place between two residents in India (card issued in India being used for purchase of goods and service offered by a merchant/service provider in India).
“It is also observed that these entities are evading the mandate of additional authentication/validation by following business / payment models which are resulting in foreign exchange outflow,” it added.
Such camouflaging and flouting of extant instructions on card security, which has been made possible by merchant transactions (for underlying sale of goods / services within India) being acquired by banks located overseas resulting in an outflow of foreign exchange in the settlement of these transactions, is not acceptable as this is in violation of the directives issued under the Payment and Settlement Systems Act 2007 besides the requirements under the Foreign Exchange Management Act, 1999, said RBI.
The bank regulator has advised that entities adopting such practices leading to wilful non-adherence and violation of extant instructions should immediately put a stop to such arrangements.
It is further advised that where cards issued by banks in India are used for making card not present payments towards purchase of goods and services provided within the country, the acquisition of such transactions has to be through a bank in India and the transaction should necessarily settle only in Indian currency, in adherence to extant instructions on security of card payments, said RBI.
RBI said that the directive shall be effective immediately. “However, existing arrangements if any, will be accorded time up to October 31, 2014 to comply with our instructions, to avoid any business disruption,” it added. (KNN/SD)
The apex bank said in a notification, “It has come to our notice that despite the above clarifications there are instances of card not present transactions being effected without the mandated additional authentication/validation even where the underlying transactions are essentially taking place between two residents in India (card issued in India being used for purchase of goods and service offered by a merchant/service provider in India).
“It is also observed that these entities are evading the mandate of additional authentication/validation by following business / payment models which are resulting in foreign exchange outflow,” it added.
Such camouflaging and flouting of extant instructions on card security, which has been made possible by merchant transactions (for underlying sale of goods / services within India) being acquired by banks located overseas resulting in an outflow of foreign exchange in the settlement of these transactions, is not acceptable as this is in violation of the directives issued under the Payment and Settlement Systems Act 2007 besides the requirements under the Foreign Exchange Management Act, 1999, said RBI.
The bank regulator has advised that entities adopting such practices leading to wilful non-adherence and violation of extant instructions should immediately put a stop to such arrangements.
It is further advised that where cards issued by banks in India are used for making card not present payments towards purchase of goods and services provided within the country, the acquisition of such transactions has to be through a bank in India and the transaction should necessarily settle only in Indian currency, in adherence to extant instructions on security of card payments, said RBI.
RBI said that the directive shall be effective immediately. “However, existing arrangements if any, will be accorded time up to October 31, 2014 to comply with our instructions, to avoid any business disruption,” it added. (KNN/SD)
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