On March 17, 2020, Reserve Bank of India (RBI) has issued new guidelines for the payment aggregators (PAs) to provide an ease for payments industry players with effect from April 1, 2020. The guidelines are issued under Section 18 read with Section 10(2) of the Payment and Settlement Systems Act, 2007. Before heading further, let’s get a brief about PAs.
- PAs are intermediaries which integrate with e-commerce companies and connect them with banks. They receive payments on behalf of these companies and transfer the money to their accounts. For example Billdesk, CCAvenue, Firstdata, Techprocess Razorpay, Cashfree, Paytm Payment Gateway.
- PA is a company incorporated in India under the Companies Act, 1956 / 2013.
- There are two kinds of PAs- Bank and Non-Bank. Banks provide PA services as part of their normal banking relationship and do not, therefore, require a separate authorisation from RBI while Non-bank PAs shall require authorisation from RBI under the Payment and Settlement Systems Act, 2007 (PSSA).
- The new rules are for non-bank PAs. Now, will go through them.
New guidelines for PAs:
-RBI has reduced the minimum capital requirements (MCR) for PAs at the time of application for the licence to Rs 15 crore from Rs 100 crore. However, the net worth needs to be increased to Rs 25 crore within three years of operations. Means the PAs who apply for authorisation on 01/04/2020 they need to achieve Rs 25 cr net-worth by March 31, 2023, and thereafter.
-On the other hand, existing PAs shall achieve a net-worth of Rs 15 crore by March 31, 2021, and a net-worth of ₹25 crores by the end of the third financial year, i.e., on or before March 31, 2023, and thereafter.
-They also need to adhere to strict security guidelines, all KYC (Know Your Customer) and AML (Anti Money Laundering) rules.
-PAs need to check that their merchant customers are not involved in the selling of prohibited or fake items.
-PAs are mandated to set up designated nodal offices to deal with customer grievance.
-PAs are prohibited from allowing online transactions to be done with ATM pin as the second factor of authentication.
-PAs having foreign direct investment (FDI) will be guided by the consolidated FDI policy of the government and the relevant foreign exchange management regulations.
– Apart from above, Indicative baseline technology-related recommendations were also provided that have to be adopted by the PAs (mandatory) and Payment Gateways-PGs (recommended). PGs provide technology infrastructure to route and facilitate the processing of an online payment transaction without any involvement in the handling of funds.
Static Point:
Net-worth: It consists of paid-up equity capital, preference shares that are compulsorily convertible to equity, free reserves, balance in share premium account and capital reserves, the book value of intangible assets and deferred revenue expenditure.
About Reserve Bank of India (RBI):
Headquarters– Mumbai, Maharashtra
Formation– 1 April 1935
Governor– Shaktikanta Das
Deputy Governors– 4 (Bibhu Prasad Kanungo, N S Vishwanathan (will retire on March 31, 2020), Mahesh Kumar Jain, Michael Debabrata Patra).
