Cash-on delivery (CoD) is the most popularly used payment method on e-commerce service providers like Amazon and Flipkart. It accounts for almost half of the purchases on these platforms in the country. However, now a new report suggests that the CoD payment method was not authorized by Reserve Bank of India (RBI) for the e-commerce sector.
The Economic Times quoted RBI’s response to an RTI query stating, “Aggregators/payment intermediaries like Amazon and Flipkart are not authorized under Section 8 of the PSS (Payments and Settlements Systems) Act, 2007.” Given the huge volume of such transactions, the statement serves as a blow to the entire industry. Along with the two e-retailers mentioned, it also affects other players in the market who collect cash from customers on behalf of third-party vendors at the time of delivering goods.
However, there are some legal experts who are of the opinion that the 2007 Act doesn’t necessarily invalidate CoD transactions. They are claiming it to mention electronic and online payment, but money received through the cash-on-delivery route haven’t been mentioned explicitly.
“This by no means makes the cash-on-delivery model illegal or unauthorized,” Abhishek A Rastogi, partner at Khaitan & Co was quoted by ET. “The Payment and Settlement Systems Act, 2007 should apply to cash-on-delivery transactions by e-commerce operators.”
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While some lawyers stated potential for punishment against the Act’s norms, Rastogi claims that CoD can be carried out with an arrangement between e-commerce operator and the merchant. These could be further regulated under the Payment and Settlement Systems Act, 2007.