On 31st October 2023, The Reserve Bank of India (RBI) has issued the Regulation of Payment Aggregator – Cross Border (PA-CB). RBI has decided to include all entities facilitating cross-border payment transactions for import and export of goods and services under the direct regulation of the RBI.
- The entities including Authorised Dealer (AD) banks, PAs and PAs-CB shall comply with these instructions.
- All non-banks which provide PA-CB services must apply for authorization from the RBI by April 30, 2024.
This directive by RBI is issued under Section 10 (2) read with Section 18 of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007), and, Section 10 (4) and Section 11 (1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999).
PAs-CB:
i.Regulation of PA-CBs defines PAs-CB as entities that facilitate cross-border payment transactions for import and export of permissible goods and services in online mode.
ii.The authorisation for PA-CB activity can be sought for categories:
- Export only PA-CB (PA-CB-E)
- Import only PA-CB (PA-CB-I)
- Export and Import PA-CB (PA-CB- E&I)
Key Points:
i.Non-banks providing payment aggregation and payment processing services must have a minimum net worth of Rs 15 crore during application to RBI.
- They need to increase net worth to Rs 25 crore by March 31, 2026.
ii.All non-bank PA-CB should register with Financial Intelligence Unit-India (FIU-IND) as a pre-requisite for seeking authorisation from the RBI.
iii.Existing PAs require explicit approval from RBI for cross-border payments.
iv.Non-compliant non-bank PA must cease operations by July 31, 2024, if unable to meet requirements or apply for authorization.
v.Import-only payment aggregators must maintain an Import Collection Account (ICA) with AD Category-I scheduled commercial bank.
- For imports exceeding Rs 2,50,000, due diligence of the buyer is necessary.
vi.Export-only payment aggregators must maintain Export Collection Account (ECA) in Indian Rupees (INR) and/or foreign currency with a scheduled commercial bank; separate ECAs needed for each non-INR currency.
RBI Imposes Monetary Penalty on PNB, Federal Bank, among others
The Reserve Bank of India (RBI) imposed monetary penalties on the following entities:
- Punjab National Bank (PNB): Rs 72 lakh penalty
- Federal Bank: Rs 30 lakh penalty
- Kosamattam Finance Limited: Rs 13.38 lakh penalty
- Mercedes-Benz Financial Services: Rs 10 lakh penalty
- L&T Finance Limited: Rs 2.50 crore penalty
PNB:
RBI imposed Rs 72 lakh penalty on PNB for non-compliance with certain provisions of RBI (Interest Rate on Deposits) Directions, 2016, RBI (Interest Rate on Advances) Directions, 2016, and Master Circular on Customer Service in Banks
- It has been imposed in exercise of powers vested in RBI conferred under the provisions of Section 47 A (1) (c) read with Sections 46 (4) (i) and 51(1) of the Banking Regulation (BR) Act, 1949.
Federal bank:
RBI imposed Rs 30 lakh penalty on Federal Bank Ltd for non-compliance with certain directions contained in RBI (Know Your Customer (KYC)) Directions, 2016.
- It has been imposed in exercise of powers vested in RBI conferred under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) of the BR Act, 1949.
Kosamattam Finance:
RBI imposed Rs 13.38 lakh penalty on Kosamattam Finance Limited, based in Kottayam, Kerala, for non-compliance with certain provisions of the “Non-Banking Financial Company (NBFC) – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016.
- This penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 25(1)(iii) read with Section 23(4) of the Credit Information Companies (Regulation) Act, 2005 (CIC (R) Act) and Section 58G (1)(b) read with Section 58B(5)(aa) of the RBI Act, 1934.
Mercedes-Benz Financial Services India:
RBI imposed Rs 10 lakh penalty on Mercedes-Benz Financial Services India Private Limited (formerly known as Daimler Financial Services India Private Limited) for non-compliance with certain provisions of the RBI (Know Your Customer (KYC)) Direction, 2016.
- This penalty has been imposed in exercise of powers conferred on RBI under the provisions of clause (b) of sub-section (1) of Section 58G read with clause (aa) of sub-section (5) of Section 58B of the RBI Act, 1934.
L&T Finance:
RBI imposed Rs 2.50 crore penalty on L&T Finance Limited, Mumbai, Maharashtra, for non-compliance with certain provisions of the NBFC – Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016.
- It has been imposed in exercise of powers conferred on RBI under the provisions of clause (b) of sub-section (1) of Section 58G read with clause (aa) of sub-section (5) of Section 58B of the RBI Act, 1934.
Recent Related News:
i.On July 5, 2023, the RBI has cancelled the banking licenses of two co-operative banks
viz. Malkapur Urban Co-operative Bank Ltd(Malkapur UCB) based in Buldhana, Maharashtra, and Shushruti Souharda Sahakara Bank Niyamita(SSS Bank) based in Bengaluru, Karnataka.
ii.According to the article titled “India @ 100” published in Reserve Bank of India (RBI) Bulletin July 2023 published by RBI’s Economic Research Department, India needs to achieve an average annual real Gross Domestic Product (GDP) growth rate of 7.6% over the next 25 years to become a developed nation by 2047-48.
About Reserve Bank of India (RBI):
Governor – Shaktikanta Das
Deputy Governors – Swaminathan Janakiraman, Michael Debabrata Patra, M. Rajeshwar Rao, T. Rabi Sankar
Establishment – 1st April 1935
Headquarters – Mumbai, Maharashtra
