In response to a Right to Information (RTI) query relating to the collection and disbursements of cash payments by e-commerce companies, the Reserve Bank of India (RBI) has reportedly clarified that e-commerce merchants or payment intermediaries such as Amazon, Flipkart, etc are not authorized under the Payments and Settlements Systems Act, 2007 (the Act) to collect cash from customers on behalf of the third party sellers (registered with the concerned e-commerce portal) at the time of delivery of goods. But such intermediaries are authorized under the Act for collecting money from customers through electronic modes of payment and later facilitating the transfer of money to the third party sellers.
Prior to the 2016 demonetization phase in India, a major portion of the country’s ecommerce transactions was based on cash-on-delivery (COD) pattern as people were reluctant to make payments online before the goods were delivered to them.
But the Government of India has been promoting and encouraging people to adopt electronic/online mode of payments to ensure that there is proper accounting of transactions that are carried out in the economy. Moreover, the major problem with the COD mode of payment system is that it may be the easiest way to convert one’s unaccounted money by purchasing goods from e-commerce portals, etc. Further, it is believed that there is a high risk involved in the COD based payment system as there are a number of people involved in delivering goods and collecting cash from the end customer. Upon delivery of goods to the customers, the courier companies, employed by the e-commerce companies, collect cash from the customers and thereafter, the e-commerce firms transfer the amount to the third party sellers.
However, some experts are of the opinion that the COD mode of payment system may not be unlawful as it is one of the payment systems that enable transactions between a buyer and a seller either by way of a contractual arrangement or otherwise. But there would certainly be a need for a legislation to regulate such system in India.
Senior Legal Associate
School of Law, University of Petroleum and Energy Studies
The Indian Lawyer