RBI’s has issued draft circular to provide clarity on several key aspects of PA regulation. One of the fundamental clarifications provided pertains to the definition of PAs, distinguishing between online PAs (PA-O) and physical Point-of-Sale PAs (PA-P). While PA-O facilitates e-commerce transactions, PA-P is involved in face-to-face or proximity payments. This distinction helps in tailoring regulatory requirements to the specific characteristics of each type of transaction, ensuring comprehensive oversight.
The circulars also address the net worth requirement for PAs, emphasizing the importance of maintaining adequate financial strength to support their operations. This requirement is applicable on an ongoing basis, highlighting the need for financial stability in the payment aggregation space.
Escrow accounts, a vital component of PA operations, are subject to specific guidelines outlined in the circulars. Funds related to Delivery versus Payment (DvP) transactions are now mandated to be routed through escrow accounts, ensuring enhanced transparency and accountability in transaction processing. However, cash-on-delivery transactions are excluded from this requirement, aligning with the scope of RBI circulars on PAs.
Due diligence of merchants onboarded by PAs is another critical aspect addressed in the circulars. The guidelines prescribe various levels of due diligence based on the size and nature of the merchants’ businesses, with specific requirements for small and medium merchants. Additionally, ongoing monitoring of merchant transactions and adherence to wire transfer guidelines are mandated to mitigate risks and ensure compliance with regulatory standards.
The circulars also provide clarity on the engagement of agents by PAs, setting forth conditions for their appointment and outlining the responsibilities of PAs in overseeing their activities. Furthermore, regulations concerning multiple PAs involved in transaction chains and the storage of card data are delineated to enhance the efficiency and security of payment systems.
Comments / feedback on the draft directions may be sent by email or by post to the Chief General Manager-in-Charge, Department of Payment and Settlement Systems, Reserve Bank of India, Central Office, 14th Floor, Shahid Bhagat Singh Marg, Mumbai-400001, on or before May 31, 2024.
