RBI considering bringing payment aggregators and gateways under direct supervision

MUMBAI: The Reserve Bank of India on Tuesday released a discussion paper detailing the possibility of bringing all payment aggregators and payment gateways under its direct regulation.

Such a move would make it mandatory for all these companies to adhere to regulatory compliances prescribed by RBI on minimum net worth, fit and proper criterion for board members and other entry point norms on technology, data storage and security.

"The activities of Payment Gateways and Payment Aggregators in online transactions are extremely crucial," the central bank said. "Entities may be a source of risk in such a technology and customer experience intensive business if they have inadequate governance practices which may impact customer confidence and experience."

As per the current guidelines, these companies are indirectly supervised by the Reserve Bank. Banks with which these entities have business operations are required to create a nodal account and scrutinise the daily settlements in these accounts.

However, citing the expanding payments ecosystem, the central bank has proposed for making changes to the existing framework under which these companies are governed.

"The customer, ordinarily has very limited access to the Payment Gateways and Payment Aggregators and must rely on merchants or banks who only can seek redress from the Payment Aggregators. Lack of proper redress mechanism and uniformity in practice across the entities is also a matter of concern," according to the central bank.

The RBI, in the discussion paper, said that it is exploring the possibility of bringing these entities within the purview of the Payment and Settlement System Act 2007. If the regulators goes through with the proposal, these companies would be required to apply for a license within a stipulated period failing which the businesses would be asked to fold, the central bank said.

The approval of license would depend on whether these companies uphold to all basic regulatory checks such as fit and proper criterion of board members, having a minimum net worth of Rs.100 crore and having basic technology capacities matching up to the regulatory prescription.

"Sufficient time, of say one year, may be given to the existing market participants to achieve compliance with the required capitalisation norms," the apex regulator said. "They shall adhere to the regulations from the date of issue of the regulations or as specified therein."

RBI said that that it has opened the discussion paper for public comments following which the final guidelines would be issued.