RBI has asked credit card issuers to set up a system that can ascertain the end use of funds to keep a check on fintechs that attempt to stretch regulatory boundaries.
Banks typically pay merchants directly, while aggregators widen the scope by collecting money through cards and making payments to entities that otherwise could not have accepted card transactions.
This lack of visibility on the end use of card payments was one of the reasons for RBI’s recent decision to bar fintechs from issuing business credit cards. This change is part of wider RBI card guidelines aimed at improving regulations following the entry of fintechs and aggregators. The new rules also require banks to allow borrowers to choose the credit card’s billing cycle.
The new rules bar banks from sharing card transaction data with outsourcing partners unless it is absolutely essential for the partner to discharge its functions.
“In case of sharing any data as stated above, explicit consent from the cardholder shall be obtained. It shall also be ensured that the storage and the ownership of card data remain with the card-issuer,” the revised norms said.
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