Quick Update: RBI issues Discussion Paper on Guidelines for Payment Gateways and Payment Aggregators. 3 options proposed - no regulation, limited regulation and strict regulation of payment aggregators and payment gateways.

On September 17, 2019, the Reserve Bank of India (“RBI”) placed the Discussion Paper on Guidelines for Payment Gateways and Payment Aggregators on its website. The RBI has proposed three options i.e. no regulation, limited regulation and strict regulation of payment aggregators and payment gateways. 

In the event the RBI decides to strictly regulate these entities, they shall be subject to, inter alia,  the following requirements: 

1. Authorisation / Licencing: The regulations would be applicable to payment aggregators and payment gateways. Non-bank payment aggregators and payment gateways shall require authorisation from RBI under Payment and Settlement Systems Act, 2007. Entities undertaking payment aggregation and payment gateway activity shall be a company incorporated in India under the Companies Act, 2013. They shall be given one financial year (from date of issue of guidelines) to comply with the entry point norms and other technology, security, storage, etc., norms issued in this regard.
2. Capital Requirements: Capital requirements shall have minimum net-worth as prescribed for Bharat Bill Payment Operating Unit (BBPOUs) (currently Rs. 100 crore) to be maintained at all times. Existing payment aggregators shall, within one year after the issuance of guidelines by RBI, comply with this net-worth requirement. Entities not able to comply with the net-worth requirement within the stipulated time frame, need not apply for authorisation but shall wind-up payment aggregation business within one year of issuance of the guidelines.
3. Governance: The entity shall be professionally managed where the promoters of the company shall satisfy the fit and proper criteria prescribed by RBI. There shall be a board approved policy for disposal of complaints / dispute resolution mechanism / time-lines for processing refunds, etc. Entities shall appoint a nodal officer responsible for regulatory and customer grievance handling functions whose details are prominently displayed on their website.
4. Safeguards against Money Laundering (KYC / AML / CFT) Provisions: The Know Your Customer (KYC) / Anti-Money Laundering (AML) / Combating Financing of Terrorism (CFT) guidelines issued by the Department of Banking Regulation (DBR), RBI, in their “Master Direction – Know Your Customer (KYC) Directions” updated from time to time, shall apply mutatis mutandis to all the payment aggregators and payment gateways along with the provisions of Prevention of Money Laundering Act, 2002 and rules framed thereunder, as amended from time to time.
5. Customer Grievance Redressal and Dispute Management Framework: Payment aggregators shall put in place a formal, publicly disclosed customer grievance redressal framework and dispute management framework, including designating a nodal officer to handle the customer complaints / grievances, the escalation matrix and turn-around-times for complaint resolution. The customer and the merchant complaints shall be promptly handled / disposed of by the payment aggregators and payment gateways as per their board approved policy, within a period of seven working days of receipt of complaint by the payment aggregator.