On March 17, 2020, the Reserve Bank of India (RBI) issued new guidelines for payment aggregators (PAs) to facilitate ease of payment to industry players effective from April 1, 2020. The guidelines are read with Section 18. 10 (2) of the Payment and Settlement Systems Act, 2007.
What are Payment Aggregators (PAs)
- Payment aggregators (PAs) are intermediaries that integrate with eCommerce companies and connect them to banks. They receive payment from these companies and transfer money to their accounts. For example Billdesk, CCAvenue, Firstdata, Techprocess Razorpay, Cashfree, Paytm Payment Gateway.
- Aggregators are a company incorporated in India under the Companies Act, 1956/2013.
- There are two types of aggregators: bank and non-bank. Banks provide aggregators services as part of their normal banking relationships and hence separate authorization from RBI is not required whereas non-bank aggregators will require authorization from RBI under the Payment and Settlement Systems Act, 2007 (PSA).
The new rules are for non-bank aggregators. Will go through them now.
New Guidelines for Aggregators:
- The RBI has reduced the minimum capital receipts (MCR) for aggregators from Rs 100 crore to Rs 15 crore at the time of applying for the license. However, the networth needs to be increased to Rs 25 crore within three years of operation. That is, aggregators applying for authorization on 01/04/2020 need to get a net worth of Rs 25 crore by March 31, 2023, and thereafter.
- On the other hand, the existing aggregators will achieve a net worth of Rs 15 crore by March 31, 2021, and a net worth of Rs 25 crore by March 31, 2023, and beyond by the end of the third financial year.
- They also need to follow strict security guidelines, all KYC (know your customer) and AML (anti-money laundering) rules.
- Aggregators need to check that their merchant customers are not involved in selling banned or counterfeit goods.
- The aggregators must establish a designated nodal office to deal with customer complaints.
- The aggregators are prohibited from allowing online transactions with ATM PIN as the second factor of authentication.
- Aggregators with foreign direct investment (FDI) will be guided by the government’s consolidated FDI policy and related foreign exchange management regulations.
- Above, recommendations related to symbolic baseline technology were also provided which are to be adopted by aggregators (mandatory) and payment gateways – PGS (recommended). PGS provides technology infrastructure to route and facilitates the processing of online payment transactions without any involvement in the handling of funds.
Networth: It consists of paid-up equity capital, preference shares which are essentially convertible to equity, free reserves, share premium account and balance in capital reserves, the book value of intangible assets and deferred revenue expenditure.
About Reserve Bank of India (RBI): Headquarters Mumbai, Maharashtra constituted 1 April 1935, Governor Shaktikanta Das