RBI issues payment system authorisation norms under new master directions

The new framework consolidates existing regulations and introduces perpetual authorisation for payment system operators subject to regulatory compliance

Regulatory orders were given on Monday for consolidating the existing guidelines on the authorisation of payment system operators (PSOs). 

 

Regarding this, the Reserve Bank of India (RBI) issued “Master Directions on Authorisation to Operate a Payment System”. 

 

The directions, which come into effect immediately, provide a unified framework covering eligibility criteria, authorisation, perpetual validity of licences, voluntary surrender of authorisation, and cooling-off requirements for PSOs.

 

The central bank said authorisation granted to new PSOs would be perpetually valid.

 

Existing operators may receive perpetual validity when their certificates of authorisation are renewed on condition that regulatory requirements are met and there is no supervisory concern.

 

 

Operators failing to meet these conditions may receive one-year renewals until deficiencies are addressed.

 

The directions retain restrictions on investment from jurisdictions identified by the Financial Action Task Force (FATF) as being non-compliant with anti-money laundering and counter-terror financing standards. 

 

New investors from such non-compliant FATF jurisdictions will not be permitted to acquire significant influence in payment system operators, with aggregate voting rights capped below 20 per cent.

 

Authorisation to operate a payment system will continue to be available on an on-tap basis. 

 

Entities seeking approval will be required to submit applications through the RBI’s portal and comply with capital and net-worth requirements prescribed for specific payment systems. 

 

Applicants will also have to meet the regulator's “fit and proper” criteria relating to integrity, financial soundness and governance standards.

 

The RBI has also detailed the process of voluntary surrender of authorisation by PSOs. Entities seeking to discontinue operations will be required to settle outstanding liabilities to customers, merchants, agents and banks and obtain auditor-certified confirmation before surrendering their licences.

 

The regulator may impose a one-year cooling-off period on entities whose authorisation has been revoked, not renewed, voluntarily surrendered, or whose application for authorisation has been rejected. 

 

During this period, such entities will not be allowed to apply for permission to operate any payment system.