The most convenient payment option Cash-on-delivery (Cod) provided by several 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.
The RBI has said that e-commerce platforms are “not authorised” to collect money from customers on behalf of third-party vendors in cash-on-delivery (CoD) deals. RBI made the statement in a reply to an RTI query.
“Aggregators/payment intermediaries like Amazon and Flipkart are not authorised under Section 8 of the PSS (Payments and Settlements Systems) Act, 2007,” mentioned the apex bank in response to the report.
The statement by the RBI could be a critical blow to the e-commerce industry in the country. According to the reports over half of the e-commerce transactions in the country are based on such pattern.
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. The Act does not explicitly mention about the money received through the cash-on-delivery route.
RBI mentioned,“RBI has not issued any specific instruction in this regard”.
Under the CoD method of payment, Flipkart, Amazon and other e-commerce platforms 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 stated, adding that the Payment and Settlement Systems Act, 2007 should apply to cash-on-delivery transactions by e-commerce operators.
India’s online retailing business is estimated to grow by more than 1,200 per cent to $200 billion by 2026, according to a Morgan Stanley report. The report estimated that online retail would account for 12 per cent of the country’s retail market by then.
There must be a grey area in the law for e-commerce as they exploit by collecting cash-on-delivery on behalf of merchants without RBI’s authorization, said Mr Kumar.
However, Experts believe that CoD is one of the reasons why e-commerce gained a foothold in India.