Cash on Delivery (CoD) is a common payment option for millions of e-commerce shoppers around India, mostly due to the low rates of credit and debit card penetration. However, the RBI has finally opined on the issue, spelling trouble for the e-commerce industry.
The Reserve Bank of India (RBI), in response to an RTI, has noted that the collection of physical cash by e-commerce firms is not permissible, but has stopped short of explicitly calling it as illegal.
The news first came to light after an Economic Times report, which said that the reply came after an RTI was filed by Dharmendra Kumar of India FDI Watch. He asked if the CoD option and disbursement of money to e-commerce merchants was in compliance with Section 8 of the Payments and Settlements Systems (PSS) Act, 2007 or not.
In its reply, the RBI said that: "aggregators/payment intermediaries like Amazon and Flipkart are not authorised under Section 8 of the PSS Act, 2007." The 2007 act came into effect in 2008 to supervise and regulate all payment systems in India.
The act focuses mainly on electronic and online payments but does not explicitly mention the CoD option, which is worth nearly Rs. 30 billion in India for e-commerce. Since it is not mentioned, there is a question of its validity, but legal experts have noted that it does not make the payment system illegal.
The Economic Times also quoted Abhishek A Rastogi, a lawyer who voiced his opinion on the matter. As per Rastogi, "It (CoD) can be done through a contractual arrangement between e-commerce operators and merchants. These will be regulated by the Payment and Settlement Systems Act, 2007, rules and regulations framed thereunder."
However, he is just one of the few in support of the system, a large number of legal experts believe that the option is in violation of the PSS act and hence e-commerce firms who offer CoD can be punished.
So while the RTI reply offers an understanding of the legality of CoD, there is still a lot of confusion on the payment option. Without any clarity from the RBI, e-commerce firms like Amazon and Flipkart will continue to offer the service, since it represents a huge chunk of their purchases. Customers too, need not worry until the RBI issues a circular clearing up the confusion.
