RBI Cracks Down on Fintechs for Merchant Misclassification:
The Reserve Bank of India is intensifying its crackdown on fintechs misclassifying retail merchants as utility merchants to exploit lower credit card interchange fees. This loophole impacts over ₹5,000 crore in transactions every month — and the clock is ticking.
Many payment aggregators reportedly shifted retail merchants into the utility category, which attracts significantly lower interchange rates. This practice allegedly allowed firms to pocket the difference between merchant charges and what issuing banks received.
⚠️ In response, major card networks like Mastercard and RuPay have already increased interchange rates for utility merchants from 0.85% to 1.85%, with Visa expected to follow suit soon. This swift change closes the gap, leaving little room for non-compliance.
With 53 payment aggregators registered with the RBI, regulatory oversight is stronger than ever. If your organization hasn’t audited merchant categorization yet, you risk severe penalties, regulatory action, and reputational damage.
Now is the time to thoroughly review your merchant onboarding processes and strengthen compliance controls to safeguard your business.
The Reserve Bank of India is intensifying its crackdown on fintechs misclassifying retail merchants as utility merchants to exploit lower credit card interchange fees. This loophole impacts over ₹5,000 crore in transactions every month — and the clock is ticking.
Many payment aggregators reportedly shifted retail merchants into the utility category, which attracts significantly lower interchange rates. This practice allegedly allowed firms to pocket the difference between merchant charges and what issuing banks received.
⚠️ In response, major card networks like Mastercard and RuPay have already increased interchange rates for utility merchants from 0.85% to 1.85%, with Visa expected to follow suit soon. This swift change closes the gap, leaving little room for non-compliance.
With 53 payment aggregators registered with the RBI, regulatory oversight is stronger than ever. If your organization hasn’t audited merchant categorization yet, you risk severe penalties, regulatory action, and reputational damage.
Now is the time to thoroughly review your merchant onboarding processes and strengthen compliance controls to safeguard your business.
