The Reserve Bank of India says that cash-on-delivery is illegal, There may be a problem for those who shop for Amazon, Flipkart and online e-commerce.

E-Commerce Merchant uses CoD is illegal or not?


(CoD)Cash-on-delivery, a payment option widely used in India and provided by almost every leading e-commerce company, including Amazon and Flipkart, is probably illegal. In response to the RTI, the Reserve Bank of India noted that collection of money by e-commerce companies like Flipkart and Amazon is not permitted, although it is not yet clearly illegal.

Economic Times reported that RTI query by Dharmendra Kumar of India asked FDI Watch to ask RBI to confirm whether e-commerce marketplace such  as cash-on-delivery (CoD) and disbursement of  money to e-commerce merchants by e-commerce marketplaces such as Flipkart and Amazon comply with the Section 8 of the Payments and Settlements Systems Act, 2007 or not.

In response to the inquiry, the bank said that “Aggregators / payments mediators like Amazon and Flipkart are not authorized under Section 8 of the PSS (Payment and Settlement System) Act, 2007”. Note that the majority of e-commerce transactions in India are done through COD payment mode and if the RBI clearly makes the model illegal then it can affect the e-commerce sector in India, which is more than 30 billion rupees.

The Payment and Settlement System Act 2007 was implemented in August 2008, controls and supervises all payment systems in India.

The act talks about online and electronic payments. There is no explicit mention of the CoD payment which raises a question on the validity of this payment form. However, some legal experts believe that there is nothing illegal in the CoD payment system.

“The Payment and Settlement System Act, 2007 should be implemented by e-commerce operators on co-ordinated transactions, Abhishek A Rastogi, an attorney was quoted by the Business Newspaper.” This (CoD) is one among e-commerce operators and traders. Can be done through contractual arrangement. They will be governed by the Payment and Settlement Systems Act, 2007, the rules and regulations. ”

While lawyers like Rastogi are standing in support of CoD, there are some legal experts who believe that the payment mode is a violation of the PSS Act. One of the  lawyers  quoted in the report says that the circular was issued eight years ago and any company not working in compliance with the act can be punished.

In fact, the RBI has not given any clarity on this issue. There is no clear mention of the CoD in this Act, which confuses the fact that the payment mode is legal or illegal. There are many online shoppers in India who are completely dependent on CoD for purchases  from Flipkart or Amazon.

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