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RBI releases discussion paper on regulation of payment gateways and payment aggregators

Capital Market 

Proposes Rs 100 crore capital requirement

The Reserve Bank has released a discussion paper on 'Guidelines for Payment Gateways and Payment Aggregators' for public comments. In the Statement on Developmental and Regulatory Policies released with the Sixth Bi-monthly Monetary Policy Statement for 2018-19, the Reserve Bank had announced that a discussion paper will be placed in the public domain for consultation with the stakeholders on comprehensive guidelines covering payments related activities of payment gateway providers and payment aggregators.

Based on the understanding of the current ecosystem, certain regulatory options and approaches are suggested in this discussion paper for regulating the activities of Payment Aggregators and Payment Gateways.

Option 1

Continue with the extant instructions with minor changes in respect of definition of the date and time of charge / debit to the customer's account used for making payment for purchase of goods / services and clarify the applicability of the guidelines.

Option 2: Limited Regulation

The Payment Gateways and Payment Aggregators shall follow the norms and guidelines in respect of minimum net-worth, merchant on-boarding, timelines for settlement of funds, maintenance of escrow account, IT security, etc., and shall be required to submit certain returns to RBI. The Payment Gateways and Payment Aggregators to be licensed / registered in a phased manner, over a period of time. Only off-site monitoring would be resorted to.

Option 3: Full and Direct Regulation

Payment Gateways and Payment Aggregators shall be authorised under the Payment and Settlement Systems Act, 2007 (PSSA). Sufficient time, of say one year, may be given to the existing market participants to achieve compliance with the required capitalisation norms. They shall adhere to the regulations from the date of issue of the regulations or as specified therein. Further, the authorised Payment Gateways and Payment Aggregators shall also, if required, maintain the funds received from customers in an escrow account with a scheduled commercial bank.

These entities shall be subjected to both on-site and off-site monitoring.

Authorisation / Licencing: The regulations would be applicable to Payment Aggregators and Payment Gateways. Non-bank Payment Aggregators and Payment Gateways shall require authorisation from RBI under PSSA. Entities undertaking Payment Aggregation and Payment Gateway activity shall be a company incorporated in India under the Companies Act, 2013. They shall be given one financial year (from date of issue of guidelines) to comply with the entry point norms and other technology, security, storage, etc., norms issued in this regard.

Capital Requirements: Capital requirements shall have minimum net-worth as prescribed for Bharat Bill Payment Operating Unit (BBPOUs) (currently Rs 100 crore) to be maintained at all times. Existing Payment Aggregators shall, within one year after the issuance of guidelines by RBI, comply with this net-worth requirement. Entities not able to comply with the net-worth requirement within the stipulated time frame, need not apply for authorisation but shall wind-up payment aggregation business within one year of issuance of guidelines.

Governance : The entity shall be professionally managed where the promoters of the company shall satisfy the fit and proper criteria prescribed by RBI. There shall be a Board approved policy for disposal of complaints / dispute resolution mechanism / time-lines for processing refunds, etc. Entities shall appoint a Nodal Officer responsible for regulatory and customer grievance handling functions whose details are prominently displayed on their website.

Safeguards against Money Laundering (KYC / AML / CFT) Provisions : The Know Your Customer (KYC) / Anti-Money Laundering (AML) / Combating Financing of Terrorism (CFT) guidelines issued by the Department of Banking Regulation (DBR), RBI, in their Master Direction - Know Your Customer (KYC) Directions updated from time to time, shall apply mutatis mutandis to all the Payment Aggregators and Payment Gateways along with the provisions of Prevention of Money Laundering Act, 2002 and Rules framed thereunder, as amended from time to time.

Customer Grievance Redressal and Dispute Management Framework : Payment Aggregators shall put in place a formal, publicly disclosed customer grievance redressal framework and dispute management framework, including designating a nodal officer to handle the customer complaints / grievances, the escalation matrix and turn-around-times for complaint resolution. The customer and the merchant complaints shall be promptly handled / disposed of by the Payment Aggregators and Payment Gateways as per their Board approved policy, within a period of 7 working days of receipt of complaint by the Payment Aggregator.

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 regular banking business. They shall, however, comply with other prescriptions regarding time-lines, customer grievance redressal mechanism, etc. However, where the banks act as Payment Aggregator they have to obtain authorisation under PSSA.

Payment Gateways and Payment Aggregators, if found to be operating without obtaining authorisation from RBI shall be penalised as per provisions under the PSSA.

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, September 18 2019. 09:00 IST