In a significant move in the online payments space, the Reserve Bank of India (RBI) has decided to allow payment system operators to take direct membership of Centralised Payment Systems (CPS), such as RTGS and NEFT. This means that companies like Paytm, PhonePe, Mastercard, Visa among others will soon be able to process RTGS and NEFT payments.
Membership in Centralised Payment Systems (CPS) -- RTGS and NEFT -- are so far limited to banks, with a few exceptions, such as specialised entities like clearing corporations and select development financial institutions.
In its statement on developmental and regulatory policies, the RBI noted that over the last few years, the role of non-bank entities in payment space such as prepaid payment instrument (PPI) issuers, card networks, white label ATM (WLA) operators, Trade Receivables Discounting System (TReDS) platforms, has grown in importance and volume, as they have innovated by leveraging technology and offering customised solutions to users.
"To reinforce this trend and encourage participation of non-banks across payment systems, it is proposed to enable, in a phased manner, payment system operators, regulated by the Reserve Bank, to take direct membership in CPSs," it said.
This facility is expected to minimise settlement risk in the financial system and enhance the reach of digital financial services to all user segments.
These entities will, however, not be eligible for any liquidity facility from the Reserve Bank to facilitate settlement of their transactions in these CPSs.
RTGS or Real Time Gross Settlement is normally used for transactions between businesses of over Rs 2 lakh. Even though the central bank had made it operational round the clock in 2020, its use by retail customers remains limited.
NEFT or National Electronic Fund Transfer is a pan-India payments system that provides for inter-bank transfer of funds.
While making it mandatory for digital wallets to be interoperable, RBI Governor Shaktikanta Das added, “To incentivise the migration of PPIs (pre-payment instruments) to full-KYC, it is proposed to increase the current limit on outstanding balance in such PPIs from Rs 1 lakh to Rs 2 lakh.”
RBI has also proposed to allow such full-KYC PPIs to be utilised for cash withdrawals.
With IANS inputs