RBI has issued a draft circular on processing and settlement of small value export and import related payments facilitated by Online Export-Import Facilitators (OEIFs) was issued for comments on April 7, 2022, by the Foreign Exchange Department of RBI under the Foreign Exchange Management Act, 1999. As the activities of OEIFs / Online Payment Gateway Service Providers (OPGSPs) are more aligned with payments, the guidelines have been redrafted taking into consideration the feedback received on the April 07, 2022. The guidelines provides for following:
Payment Aggregators (PAs)
Payment Aggregators, often referred to as PAs, are entities that enable cross-border payment transactions for the import and export of permissible goods and services in an online mode. These entities act as intermediaries, streamlining the payment process for businesses engaged in international trade. By doing so, PAs help facilitate the smooth flow of funds across borders and contribute to the efficiency of international trade.
Escrow Accounts
Within the context of PAs, the term ‘escrow account’ is crucial. This refers to an account where PAs pool and aggregate the amounts collected on behalf of the merchants they work with. Essentially, the escrow account serves as a secure holding space for funds until the completion of a transaction. This helps ensure the financial integrity of the payment process, providing both merchants and customers with a layer of security.
Requirements of Authorization
AD Category-I banks, which are authorized dealers in foreign exchange, do not require separate approval from the RBI to undertake PA-CB activities. They are already regulated by the RBI and are authorized to handle foreign exchange transactions.
Non-bank entities that provide PA-CB services are required to apply to the RBI for authorization. These entities must apply in one of the following categories: Export-only PA-CB (PA-CB-E), Import-only PA-CB (PA-CB-I), or Export and Import PA-CB (PA-CB-E&I).
Existing non-bank PAs offering these services should adhere to various guidelines, including those related to governance, merchant onboarding, customer grievance redressal, technology recommendations, security, fraud prevention, and risk management. Non-compliance with these guidelines may lead to their authorization applications being refused.
Non-bank PAs must register with the Financial Intelligence Unit-India (FIU-IND) as a prerequisite for seeking authorization from the RBI.
Net Worth Criterion
Non-bank PAs must meet specific net worth criteria. Existing non-bank PAs, as of the date of the circular, must have a minimum net worth of ₹15 crore when submitting their authorization applications to the RBI and a minimum net worth of ₹25 crore by March 31, 2026. New non-bank PAs should have a net worth of ₹15 crore when applying for authorization and reach a minimum net worth of ₹25 crore by the end of the third financial year after receiving authorization.
Non-bank PAs are required to provide a certificate from their statutory auditor, along with audited financial statements, to evidence their net worth. Non-compliance with the net worth requirements or failure to apply for authorization within the stipulated time frame may result in the winding up of PA-CB activities by July 31, 2024.
Import and Export PA-CBs
PA-CBs may focus on import, export, or both activities. Import-only PA-CBs must maintain an Import Collection Account (ICA) with an AD Category-I scheduled commercial bank. Payments for imports are received in an escrow account and transferred to the ICA for onward transfer to foreign merchants.
Export-only PA-CBs must maintain an Export Collection Account (ECA) denominated in Indian Rupees (INR) and/or foreign currency. All export proceeds are credited to the relevant currency ECA, and the funds are settled in the account of the respective merchant.
Customer Due Diligence
PA-CBs are responsible for conducting Customer Due Diligence, as defined in the Master Direction – Know Your Customer (KYC) Direction, 2016. This includes verifying and onboarding merchants and ensuring that they do not facilitate payment transactions for the import or export of restricted or prohibited goods and services.
