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RBI releases new guidelines for payment aggregators

Topics Covered: Inclusive growth and issues arising from it.

RBI releases new guidelines for payment aggregators

What to study?

For Prelims and Mains: PAs- roles, functions and regulation.

As per the new guidelines:

  1. Capital requirements for payment aggregators has been reduced to Rs 15 crore at the time of application for the licence.
  2. This needs to be increased to Rs 25 crore within three years of operations.
  3. Existing non-bank entities offering payment aggregation (PA) services shall apply for authorisation on or before June 30, 2021.
  4. Pure-play payment gateway companies would be separated as an entity and would be identified as technology service providers for banks and non-banks.
  5. PAs have also been asked to adhere to strict security guidelines, adhere to all KYC (Know Your Customer) and AML (Anti Money Laundering) rules.
  6. The guidelines have also mandated that PAs need to check their merchant customers are not involved in selling of prohibited or fake items.
  7. The central bank has also asked PAs to set up designated nodal offices to deal with customer grievance.
  8. The RBI has prohibited PAs from allowing online transactions to be done with ATM pin as the second factor of authentication, which few payment gateway companies were offering as a service.

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Who are payment aggregators?

These are players who integrate with e-commerce companies and connect them with banks. They receive payments on behalf of these companies and transfer the money to their accounts.

Background:

Entities like Billdesk, CCAvenue, Firstdata, Razorpay, Cashfree, Paytm Payment Gateway and others are offering payment services to ecommerce companies. Given the largescale adoption of digital payments and emergence of so many players, the RBI expressed interest in regulating the space.

Insta Link:

Prelims Link:

  1. Payment aggregators vs Payment Gateways- functions.
  2. Capital requirements.
  3. NBFCs vs SFBs.

Mains Link:

Who are payment aggregators? Why there is a need for regulation of these entities? Discuss.

Sources: the Hindu.