RBI mandates regulatory approval for PoS providers to continue operations

  • The RBI wants non-banks providing physical point of sale services to notify the regulator of their intention to seek approval within 60 days.

Shayan Ghosh
First Published17 Apr 2024
The Reserve Bank of India is taking steps to regulate PoS service providers. (File Photo: Reuters)
The Reserve Bank of India is taking steps to regulate PoS service providers. (File Photo: Reuters)

The Reserve Bank of India (RBI) has proposed that non-banks offering physical point of sale services (PoS) must notify the regulator of their intent to seek authorization within 60 days, and then submit their application by 31 May 2025, for approval to continue operations.

“…they shall be allowed to continue their operations till they receive communication from the RBI regarding (the) fate of their application,” the regulator said in a draft circular late on Tuesday. 

The central bank said that existing non-bank physical payment aggregators (PA-P) failing to meet the net worth requirements or not applying for authorization within the specified timeframe must cease operations by 31 July 2025. It has directed banks to close the accounts associated with the PA activities of these non-banks by 31 October 2025, unless evidence of a submitted authorization application is provided.

In September 2022, the RBI had said that payment aggregators play an crucial role in the payments ecosystem and were thus brought under regulations in March 2020. However, the regulations are only applicable to those processing online or e-commerce transactions and not offline payments. The new draft seeks to harmonise regulations between the two sets of service providers.

In line with this expanded regulatory framework, non-bank PoS providers in the online domain are now required to seek approval from the Department of Payment and Settlement Systems (DPSS) of the regulator within 60 calendar days to continue their business.

“The entities, currently carrying out this activity should ensure adherence to the guidelines on governance, merchant on-boarding, customer grievance redressal and dispute management framework, baseline technology recommendations, security, fraud prevention and risk management framework (provided in the March 17, 2020 circular) within a period of three months from the date of this circular,” it said. 

The RBI clarified that banks providing physical payment aggregator services as part of their normal banking operations do not need separate authorization but must ensure compliance with these new instructions within three months from the date of the circular.

According to the draft circular, non-banks providing PA-P services as of the date of the circular must have a minimum net worth of 15 crore at the time of applying for authorization and must increase this to at least 25 crore by 31 March 2028. This net worth of 25 crore must be maintained at all times thereafter.

For new non-bank PA-Ps or those that have not commenced operations before the issuance of this circular, the RBI specified that they should have a minimum net worth of 15 crore at the time of applying for authorization and achieve a minimum net worth of 25 crore by the end of the third financial year after receiving authorization, maintaining it thereafter.

Also Read: With penalties, restrictions, RBI turns up heat on lax KYC

 

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