RBI Mandates Regulatory Approval for PoS Providers: Ensuring Compliance and Streamlined Operations
Introduction
The Reserve Bank of India (RBI) has recently proposed new regulations for non-banks offering physical Point of Sale (PoS) services. These regulations aim to bring harmony between offline and online payment aggregators and ensure standardized practices throughout the industry. The RBI has set specific timelines and requirements for these service providers to seek authorization to continue their operations, promoting transparency and accountability in the payments ecosystem.
Streamlining Authorization Process for Non-Bank PoS Providers
To ensure compliance with the new regulations, non-bank PoS providers must follow the following steps within the specified timelines:
- Notification and Application: Non-banks offering physical PoS services must notify the RBI of their intent to seek authorization within 60 days. They are then required to submit their application for approval by 31 May 2025.
- Continuation of Operations: While awaiting communication from the RBI regarding their application, these non-bank PoS providers will be allowed to continue their operations.
- Cessation of Operations for Non-Compliant Providers: Non-bank physical payment aggregators failing to meet the net worth requirements or not applying for authorization within the specified timeframe must cease operations by 31 July 2025.
Harmonizing Regulations for Payment Aggregators
The RBI recognized the crucial role played by payment aggregators in the payments ecosystem and brought them under regulation in March 2020. However, the previous regulations only applied to those processing online or e-commerce transactions, excluding offline payments. The new draft circular aims to harmonize regulations between both sets of service providers, ensuring a level playing field.
Compliance and Guidelines for Non-Bank PoS Providers
Non-bank PoS providers in the online domain must adhere to the following guidelines:
- Governance and Compliance: Entities currently engaged in this activity must comply with guidelines on governance, merchant onboarding, customer grievance redressal, and dispute management framework provided in the circular issued on March 17, 2020, within three months from the date of the current circular.
- Baseline Technology Recommendations: Non-bank PoS providers must meet the baseline technology recommendations set by the RBI to ensure robust security, fraud prevention, and risk management framework.
Compliance Requirements for Banks
Banks providing physical payment aggregator services as part of their regular banking operations are not required to obtain separate authorization. However, they must ensure compliance with the new instructions outlined within three months from the date of the circular.
Key Financial Requirements for Non-Bank Payment Aggregators
The proposed regulations set specific financial requirements for non-bank payment aggregators, including:
- Minimum Net Worth: Non-banks providing Payment Aggregator services, as of the date of the circular, must have a minimum net worth of ₹15 crore at the time of applying for authorization. This net worth must be increased to at least ₹25 crore by 31 March 2028 and maintained thereafter.
- New Non-Bank PA-Ps: Non-bank Payment Aggregators that have not commenced operations before the issuance of this circular must have a minimum net worth of ₹15 crore at the time of applying for authorization. They must achieve a minimum net worth of ₹25 crore by the end of the third financial year after receiving authorization and maintain it thereafter.
Conclusion
The RBI’s new regulations for non-bank PoS providers aim to promote transparency, accountability, and streamlined operations in the payments ecosystem. By ensuring compliance with specific timelines and minimum net worth requirements, these regulations foster a level playing field for payment aggregators and harmonize practices between online and offline service providers. Non-banks must diligently adhere to the guidelines and secure necessary authorizations to continue their operations seamlessly and contribute to a robust and efficient payments landscape in India.
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