Cash-on-delivery (CoD) method of payment option provided by online retailers such as Flipkart and Amazon may be a regulatory grey area as per the Reserve Bank of India's (RBI's) response to a Right to Information (RTI) query, according to a report in The Economic Times.
The RBI, in a response to an RTI query, said a collection of payment from platforms such as Amazon and Flipkart are not authorised.
“Aggregators/payment intermediaries like Amazon and Flipkart are not authorised under Section 8 of the PSS (Payments and Settlements Systems) Act, 2007,” the apex bank said in its response to the query filed by Dharmendra Kumar of India FDI Watch.
The RTI query asked the RBI to confirm if cash-on-delivery payment collection and disbursement to e-commerce merchants or marketplaces such as Flipkart and Amazon are authorised under the Payments and Settlements Systems Act, 2007.
While the Act mentions electronic and online payment, it does not explicitly mention about money received through the cash-on-delivery route.
“RBI has not issued any specific instruction in this regard,” RBI said in its reply.
Under the CoD method of payment, Flipkart, Amazon and other marketplaces collect cash from customers on behalf of third-party vendors when the goods are delivered.
Legal experts, however, say that the rules do not necessarily invalidate cash-on-delivery.
"This by no means makes the cash-on-delivery model illegal or unauthorised,” Abhishek A Rastogi, a partner at Khaitan & Co told the paper, adding that the Payment and Settlement Systems Act, 2007 should apply to cash-on-delivery transactions by e-commerce operators.
Kumar, however, said that there must be a grey area in the law they (e-commerce) are exploiting by collecting cash-on-delivery on behalf of merchants without RBI’s authorisation.
Experts believe that CoD is one of the reasons why e-commerce gained a foothold in India.
India’s online retailing business is estimated to grow by more than 1,200 percent to $200 billion by 2026, according to a Morgan Stanley report. The report estimated that online retail would account for 12 percent of the country’s retail market by then.
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