In a notification, RBI said, "It is advised that entities adopting such practices leading to wilful non-adherence and violation of extant instructions should immediately put a stop to such arrangements.
"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."
RBI has clarified that the linkage to an overseas website/ payment gateway cannot be done via CNP transaction.
It said such camouflaging and flouting of extant instructions on card security were resulting in an outflow of foreign exchange in the settlement of these transactions. The apex bank said that it is not acceptable as this is in violation of the directives issued under the Payment and Settlement Systems.
It said such transactions have to be through a bank in India and the transaction should necessarily settle only in Indian currency.