RBI to directly regulate entities facilitating cross border payment transactions

The Reserve Bank of India (RBI) announced on Tuesday that all entities facilitating cross border payment transactions for import and export of goods and services will be directly regulated by the central bank. These entities will be treated as Payment Aggregator-Cross Border (PA-CB).

Bringing Cross-Border Payment Facilitators Under RBI Regulation

The decision to bring all entities facilitating cross-border payment transactions under the direct regulation of the RBI was made in light of the developments in the area of cross-border payments. Currently, all Payment Aggregators (PAs) that facilitate processing of domestic transactions in online mode are covered within the scope of RBI regulations.

Net Worth Requirements for PA-CBs

Non-banks providing PA-CB services as on the date of the circular should have a minimum net worth of Rs 15 crore at the time of submitting application to the RBI for authorisation and a minimum net worth of Rs 25 crore by March 31, 2026. New non-bank PA-CBs entities which have not commenced operations should have a minimum net worth of Rs 15 crore at the time of submitting application and should attain a minimum net worth of Rs 25 crore by the end of the third financial year of grant of authorisation.

Procedures for Handling Online Transactions

The circular also prescribes procedures for handling of online transcations by the PAs, including Know Your Customer (KYC) norms, transaction limits, and reporting requirements.

Compliance Requirements for Banks

Banks undertaking PA-CB activity should ensure compliance with the requirements for PA-CBs by April 30, 2024. The circular also specifies that in respect of import and export transactions processed by PA-CBs, the maximum value per unit of goods / services sold / purchased shall be Rs 25,00,000.

The RBI's decision to directly regulate entities facilitating cross border payment transactions is aimed at ensuring a safe and secure environment for cross-border payments. The move is expected to further strengthen India's position as a global financial hub.