Why cash on delivery for online orders is illegal

New Delhi, July 27: Almost 50% of every leading e-commerce companies including Amazon and Flipkart who depend solely on cash-on-delivery or CoD option available, wherein the end user pays for the products when it is actually delivered. However, little did we knew that this CoD option, which is so popular among online shoppers, is most likely illegal.

Yes you read it right?

According to an Economic Times report, Dharmendra Kumar from India FDI Watch, an organization of small traders and farmers had filed an Right to Information query regarding the legality of Cash on Delivery model used by ecommerce players.

The RTI query had specifically asked about Payments and Settlements Systems Act, 2007, No. 51 of 2007, and whether CoD model is approved by this act or not.

The Payments and Settlements Systems Act 2007 came into effect in August 2008 regulates and supervises all the payment systems in India.

Reserve Bank of India, in a response to an RTI, has noted that collection of money by e-commerce companies like Flipkart and Amazon is not permissible, although it is also not yet explicitly illegal.

In their reply, RBI had said that as per the Payments and Settlements Systems Act, 2007, Cash on Delivery model is not allowed for online marketplaces operating in India.

In the words of RBI, "Aggregators/payment intermediaries like Amazon and Flipkart are not authorised under Section 8 of the PSS (Payments and Settlements Systems) Act, 2007".

Flipkart had introduced CoD model in 2010, and when Amazon entered India in 2013, they too used the same CoD model to make inroads into the market.