1 min read.Updated: 03 Aug 2021, 06:24 PM ISTLivemint
Payment service operators (PSOs) have been asked to comply with the framework by March 31, 2022
This framework is issued under provisions of Payment and Settlement Systems Act, 2007, RBI stated
Reserve Bank of India (RBI) has issued a framework for payment and settlement related activities by payment system operators. The central bank has asked the operators to ensure compliance with the framework for all their outsourcing arrangements by March 31, 2022.
Payment system operators (PSOs), by virtue of services they provide and the construct of models on which they operate, largely outsource their payment and settlement-related activities to various other entities, RBI noted.
The proposal to float a framework for such outsourcing by PSOs was first announced in the statement on developmental and regulatory policies released with the monetary policy statement in February.
This framework is issued under Section 10 (2) read with Section 18 of Payment and Settlement Systems Act, 2007, RBI stated. RBI clarified that PSOs will not have to seek its prior approval for outsourcing.
RBI mentioned that the framework "seeks to put in place minimum standards to manage risks in outsourcing of payment and/or settlement-related activities (including other incidental activities like onboarding customers, IT based services, etc."
The service provider to whom the work is being outsourced to, unless it is a group company of the PSO, shall not be owned or controlled by any director or officer of the PSO or their relatives, RBI stated.
As per the framework, PSOs will have to exercise due diligence, put in place sound and responsive risk management practices for effective oversight, and manage the risks arising from such outsourcing of activities.
PSOs have been prohibited from outsourcing core management functions, including risk management, internal audit, compliance and decision-making functions such as determining compliance with KYC norms. However, for internal audit, auditors can be appointed by the PSO from its own employees or from the outside on contract.
"Outsourcing of any activity by the PSO shall not reduce its obligations, and those of its board and senior management, who are ultimately responsible for the outsourced activity. The PSO shall, therefore, be liable for the actions of its service providers and shall retain ultimate control over the outsourced activity," RBI mentioned in the framework.
Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.
Never miss a story! Stay connected and informed with Mint.
our App Now!!