RBI recommends modifications to net-worth guidelines for payment systems

Published : 17 April 2024
Updated : 23 May 2024
RBI recommends modifications to net-worth guidelines for payment systems

The Reserve Bank of India (RBI) today proposed net-worth guidelines for payment systems (PAs) that enable face-to-face or proximity transactions. Companies that provide services must now have a net worth of at least Rs 15 crore when requesting for approval from the RBI. According to the draft rules, they must have a net worth of at least Rs 25 crore by March 2028.

Within three months of the circular's publication, the companies already carrying out this activity must ensure compliance with the requirements on governance, merchant onboarding, customer grievance redressal, fraud prevention, and risk management. The RBI will set the timing for the circular after completing the rules based on feedback on the draft norms.

The RBI has also announced draft revisions to existing Payment systems guidelines addressing Know Your Customer (KYC) rules, merchant due diligence and monitoring, and escrow account operations, among other things, with the goal of strengthening the payment ecosystem even further.

The banking regulator has recognised two key types of PAs that are part of the country's payments ecosystem. This includes PA-Online Point of Sale (PA-O) and PAs that facilitate in-person or proximity payment transactions, which are now referred to as PA-Physical Point of Sale (PA-P).

New non-bank PA-Ps must have a net worth of at least Rs 15 crore when they apply to the RBI for approval. They will be expected to achieve a minimum net value of Rs 25 crore by the end of the third fiscal year after being granted authorization, and to maintain this level at all times thereafter.

The Reserve Bank of India (RBI) stated. Existing non-bank PA-P that are unable to meet the net-worth threshold or fail to apply for authorisation within the time frame specified must cease PA-P business by July 31, 2025, according to the banking regulator.

Banks will be required to liquidate accounts used for non-bank PA-P activity by October 31, 2025, unless such PAs provide proof supporting the application for authorization submitted to the RBI.