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Business News/ News / RBI to streamline net banking by making merchant payments interoperable
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RBI to streamline net banking by making merchant payments interoperable

Currently, for net banking transactions, banks need to individually integrate and have bilateral arrangements with each payment aggregator servicing different online merchants

RBI governor Shaktikanta Das made the announcement as part of digital payments awareness week celebrations at the central bank's headquarters on Monday. (PTI)Premium
RBI governor Shaktikanta Das made the announcement as part of digital payments awareness week celebrations at the central bank's headquarters on Monday. (PTI)

MUMBAI : Customers will soon be able to pay businesses through net banking irrespective of whether their banks and the merchants’ payment aggregator are integrated, with the central bank ironing out one more wrinkle in India’s rapidly evolving digital payments ecosystem.

“We have given approval for implementing such an interoperable system to NPCI Bharat BillPay Ltd. We expect the launch of this interoperable payment system for internet banking during the current calendar year," Reserve Bank of India governor Shaktikanta Das said on Monday. 

Das said such interoperability would facilitate quicker settlement of funds for merchants. At present, net banking transactions are not interoperable, requiring banks to individually integrate and have bilateral arrangements with each payment aggregator servicing different online merchants. (Customers can pay merchants or businesses online through credit and debit cards and UPI, though.) 

Payment aggregators are intermediaries that facilitate digital payments between consumers and merchants or businesses. 

At present, there are 18 online payment aggregators authorized by RBI, including Razorpay Software Pvt. Ltd, Amazon Pay (India) Pvt. Ltd, Google India Digital Services Pvt. Ltd, Tata Payments Ltd, and Zomato Payments Pvt. Ltd.

Interoperable net banking payments will be akin to setting up a clearing house to settle internet banking transactions between customers and merchants, said a person familiar with RBI’s plans. This would do away with the requirement of individual tie-ups, this person said. 

For instance, to pay for goods or services purchased on an online marketplace, a customer is redirected by the ecommerce website to the page of the aggregator where all available payment options are displayed. 

However, if a customer’s bank is not integrated with that payment aggregator, that bank’s name would not appear under the net banking payment option. 

Das said that under the existing system, if customers want to pay from their bank accounts to merchants or businesses, the merchant’s payment aggregator and customer’s bank must have an arrangement. 

“Given the multiple number of payment aggregators, it is difficult for each bank to integrate with each PA," said Das, participating in an RBI event to mark the digital payments awareness week. “Further, due to the lack of a payment system and a set of rules for these transactions, there are delays in actual receipt of payments by merchants and settlement risks."

Internet banking, said Das, is one of the oldest modes for online merchant payment transactions and is a preferred channel for payments such as income tax, insurance premiums, mutual fund payments, and e-commerce transactions. 

“Keeping in view these bottlenecks, in our Payments Vision 2025, we had envisaged an interoperable payment system for internet banking transactions," said Das. 

Experts said that this move would be more beneficial to smaller aggregators that have not yet tied up with all banks. 

“This levels the playing field for smaller payment aggregators who would not have been able to tie up with a majority of banks. The larger ones anyway have made arrangements with most of the leading banks in the country," said Parijat Garg, a fintech expert.

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ABOUT THE AUTHOR
Shayan Ghosh
Shayan Ghosh is a national editor at Mint reporting on traditional banks and shadow banks. He has over 12 years of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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Published: 04 Mar 2024, 07:04 PM IST
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