RBI releases stricter regulations for payment aggregators

The Reserve Bank of India has released guidelines for payment aggregators (PAs) and payment gateways (PGs) in terms of regulation. This comes after it first floated a discussion paper in September 2019.

As per the new regulations, a payment aggregator should be a company incorporated in India under the Companies Act, 1956 / 2013.

Payment aggregators that are not banks will now require authorisation from RBI under the Payment and Settlement Systems Act, 2007 (PSSA).

Payment Aggregators are those that allow a merchant to process online payments made by customers. Razorpay, BillDesk, Paytm, PayU, Instamojo are some of the companies in India that work as payment aggregators.

RBI has asked all existing non-bank payment aggregators to apply for authorisation on or before June 30, 2021. “They shall be allowed to continue their operations till they receive communication from RBI regarding the fate of their application,” the RBI stated.

In the case of e-commerce players that offer payment aggregator services, RBI has directed them to discontinue the activity beyond June 30, 2021 or separate the payment aggregator business from the marketplace business and apply for authorisation before June 30, 2021.

Existing payment aggregators will have to have a net worth of Rs 15 crore as of March 31, 2021 and a net worth of Rs 25 crore by March 31, 2023. After this, RBI mandates that companies maintain a net worth of Rs 25 crore at all times thereafter.

“PAs that are not able to comply with the net-worth requirement within the stipulated time frame shall wind-up payment aggregation business. The banks maintaining nodal / escrow accounts of such entities shall monitor and report compliance in this regard,” RBI stated.

RBI also requires Pas to inform RBI of any takeover or acquisition of control or change in management of a non-bank PA within 15 days with complete details. RBI shall examine the ‘fit and proper’ status of the management and, if required, may place suitable restrictions on such changes.

“PAs shall disclose comprehensive information regarding merchant policies, customer grievances, privacy policy and other terms and conditions on the website and / or their mobile application,” RBI guidelines state.

PAs are also required to appoint a Nodal Officer responsible for regulatory and customer grievance handling functions. PAs shall prominently display details of the nodal officer on their website.

While onboarding merchants, RBI mandates PAs do a background and antecedent check of the merchants, to ensure that such merchants do not have any malafide intention of duping customers, do not sell fake / counterfeit / prohibited products, etc. The merchant’s website shall clearly indicate the terms and conditions of the service and timeline for processing returns and refunds.