RBI proposes norms to regulate payment gateways and aggregators

In a bid to make digital payments safer and transparent, the Reserve Bank of India (RBI) has proposed to regulate payment gateway service providers and aggregators in online transactions.

"The activities of payment gateways and payment aggregators in online transactions are extremely crucial," it said in a discussion paper proposing a regulatory framework for these entities.

"Entities may be a source of risk in such a technology and customer experience intensive business if they have inadequate governance practices which may impact customer confidence and experience."

The lack of proper redress mechanism and uniformity in practice across the entities is also a matter of concern, said the central bank.

It said capital requirements will be minimum net-worth as prescribed for Bharat Bill payment operating units (currently Rs 100 crore) to be maintained at all times. "Existing payment aggregators should, within one year after the issuance of guidelines by RBI, comply with this net-worth requirement," the RBI said.

Those not able to comply with the net-worth requirement within the stipulated time frame need not apply for authorisation. They will also have to appoint a nodal officer responsible for regulatory and customer grievance handling functions, whose details will be displayed on their website, said the RBI.

The entity should be professionally managed where promoters of the company should satisfy the fit-and-proper criteria prescribed by RBI. There should be a board-approved policy for disposal of complaints, dispute resolution mechanism and timelines for processing refunds.

As banks are already regulated entities of RBI, the payment gateway services provided by them need not require a separate authorisation as these activities form part of a regular banking business. They should, however, comply with other prescriptions regarding timelines and customer grievance redressal mechanism.

However, where the banks act as payment aggregator they have to obtain authorisation under the Payment and Settlement Systems Act 2007 (PSSA). The RBI said these entities are a critical link in the transaction flow and there is a case to regulate activities and these fall within the ambit of PSSA.

"There is a need for appropriate delineation of roles and responsibilities among merchants and customers, clarity in case of routing of transactions through proper reporting of transactions handled," it said.

The central bank has invited comments on the policy paper from all stakeholders and members of the public by October 17.