The Reserve Bank of India (RBI) said last week that online transactions using credit cards for the purchase of items and services within India must be done through a bank within the country and be transacted in rupees. As the Indian Express explains, this may hurt online businesses, including Google Play, Amazon, and Uber, that route credit card transactions through an international payment gateway, bypassing the two-step verification required by the RBI.
In a statement, the RBI said:
“It has come to our notice that despite the above clarifications there are instances of card not present transactions being effected without the mandated additional authentication/validation even where the underlying transactions are essentially taking place between two residents in India. It is also observed that these entities are evading the mandate of additional authentication/validation by following business/payment models which are resulting in foreign exchange outflow.”
The RBI added that even though its new restrictions are effective immediately, it will give businesses until October 31, 2014, to comply.
Indian news analysis site Medianama notes that it is still unclear whether the RBI’s restrictions affect purchases only made in India, or if they will impact all purchases made using Indian cards in India.
Though the restrictions will negatively impact foreign online business operating in India, Medianama notes that it will result in more business for Indian payment gateways and banks, because all merchants will have route transactions through Indian payment gateways.
India recently became Uber’s largest market outside of the U.S. The car calling app is now available in 10 Indian cities, the same as rival Olacabs, which is headquartered in Mumbai and may therefore have an easier time dealing with the RBI’s new restrictions.
Amazon, meanwhile, sees India as one of its most important growth markets. It recently announced that it plans to invest $2 billion in its Indian marketplace, just one day after rival Flipkart, which is headquartered in Bangalore, announced that it had received a massive $1 billion in new funding led by Tiger Global Management and Naspers.
TechCrunch has contacted Uber, Amazon, and Google for comment and will update this post if we hear back from them.
In a statement, an Amazon India spokesperson said, “We remain compliant to all RBI regulations, including the present notification & and will continue to do so.”
An Uber spokesperson said, “With more Uber cities in India than in any other country outside the U.S., riders, drivers and communities across the 10 cities have embraced Uber. We are working to gain more clarity on this new rule while we continue to connect riders in India with safe, reliable, and convenient rides.”