{"id":40664,"date":"2024-04-26T08:33:41","date_gmt":"2024-04-26T03:03:41","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=40664"},"modified":"2025-10-13T12:44:11","modified_gmt":"2025-10-13T07:14:11","slug":"payment-aggregators-rbi-rules","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/payment-aggregators-rbi-rules\/","title":{"rendered":"RBI\u2019s Draft Rules for Payment Aggregators"},"content":{"rendered":"<h2>What\u2019s in today\u2019s article?<\/h2>\n<ul>\n<li>Background<\/li>\n<li>Who are Payment Aggregators?<\/li>\n<li>What Exactly are the RBI\u2019s Draft Rules About?<\/li>\n<li>Is Registration with RBI Being Made Mandatory?<\/li>\n<li>Does the Draft Rules talk about Provisions for Sustainability?<\/li>\n<li>Provisions for KYC Requirements<\/li>\n<li>Provisions for Data Privacy<\/li>\n<\/ul>\n<h2>Background<\/h2>\n<ul>\n<li>The <a href=\"https:\/\/vajiramandravi.com\/current-affairs\/reserve-bank-of-india\/\" target=\"_blank\" rel=\"noopener noreferrer\" target=\"_blank\">Reserve Bank of India<\/a> (RBI) had floated two consultation papers earlier this month to seek better regulation of offline Payment Aggregators (PAs).<\/li>\n<li>The first deals with activities of offline PAs, while the second proposes to strengthen the ecosystem\u2019s safety by expanding instructions for <a href=\"https:\/\/vajiramandravi.com\/current-affairs\/kyc\/\" target=\"_blank\" rel=\"noopener noreferrer\" target=\"_blank\">Know Your Customer<\/a> (KYC), due diligence of onboarded merchants and operations in Escrow accounts.<\/li>\n<li>The RBI has invited comments\/feedback by May 31.<\/li>\n<\/ul>\n<h2>Who are Payment Aggregators?<\/h2>\n<ul>\n<li>Payment aggregators (Pas) are entities that facilitate online transactions by collecting payments from customers on behalf of merchants.<\/li>\n<li>They act as intermediaries between the buyer, the seller, and the payment gateway.<\/li>\n<li>Working of PAs:\n<ul>\n<li><strong>Collect Payments:<\/strong> Payment aggregators collect payments from customers using various payment methods like credit\/debit cards, net banking, digital wallets, etc.<\/li>\n<li><strong>Transfer Funds:<\/strong> Once the payment is collected, the aggregator transfers the funds to the merchant after deducting their service fees or commission.<\/li>\n<li><strong>Settlement:<\/strong> The aggregator ensures that the funds are settled in the merchant&#8217;s bank account within a specified time frame, which is usually a few days.<\/li>\n<li><strong>Security:<\/strong> Payment aggregators ensure the security of transactions by using encryption and other security measures to protect sensitive customer information.<\/li>\n<li><strong>Integration:<\/strong> They offer APIs and plugins that merchants can integrate into their websites or mobile apps to easily accept payments.<\/li>\n<\/ul>\n<\/li>\n<li>Popular payment aggregators include companies like <strong>Razorpay<\/strong>, <strong>Paytm<\/strong> and <strong>PayPal<\/strong> in India.<\/li>\n<li>They play a crucial role in enabling businesses to accept payments online, thereby facilitating e-commerce and online transactions.<\/li>\n<\/ul>\n<h2>What Exactly are the RBI\u2019s Draft Rules About?<\/h2>\n<ul>\n<li>The existing guidelines cover their activities in e-commerce sites and other online avenues.<\/li>\n<li>The latest draft guidelines propose to extend these regulations to offline spaces, entailing proximity or face-to-face transactions.<\/li>\n<li>RBI observed back in June 2022 that the nature of activities carried out by the PAs, both online and offline, is similar.<\/li>\n<li>It aspires to bring in \u201csynergy in regulation covering activities and operations of PAs apart from convergence on standards of data collection and storage.\u201d<\/li>\n<li>The proposed norms are elaborate and incorporate lessons from what happened this year with <strong>Paytm Payments Bank<\/strong> (PPBL).\n<ul>\n<li>The PPBL crisis was triggered by, among other things, major irregularities in the bank\u2019s KYC adherence.<\/li>\n<li>In fact, the Financial Intelligence Unit (FIU-IND) had imposed a penalty of \u20b95.49 crore having found that PPBL \u201cengaged in a number of illegal acts, including organising and facilitating online gambling.\u201d<\/li>\n<\/ul>\n<\/li>\n<li>With expansion of the utility and scope of operations of PAs, RBI appears to be strengthening the ecosystem against any such opacity.<\/li>\n<\/ul>\n<h2>Is Registration with RBI Being Made Mandatory?<\/h2>\n<ul>\n<li>The primary focus here is on non-bank PAs and within them, the offline extensions.<\/li>\n<li>Banks providing physical PA services as part of their normal banking relationship would not require any separate authorisation from the RBI.<\/li>\n<li>They are <strong>only expected to comply with the revised instructions within three months after they are issued<\/strong>.<\/li>\n<li>PAs, providing online \/ offline services, would have to inform RBI within 60 days (after the circular is issued), about their intent to seek authorisation.<\/li>\n<\/ul>\n<h2>Does the Draft Rules talk about Provisions for Sustainability?<\/h2>\n<ul>\n<li>RBI proposes that non-banking entities currently providing proximity\/face to face transaction services have a minimum net worth of \u20b915 crore when they apply.<\/li>\n<li>This would be extended to \u20b925 crore by March 31, 2028.<\/li>\n<li>The requirements are the same for new applicants, the difference being that a \u20b925 crore net worth requirement would apply at the end of three financial years when the authorisation is granted.\u00a0<\/li>\n<li>RBI has proposed that existing offline operators unable to comply with the approval-seeking timeframe wind-up their operations by July 31, 2025.<\/li>\n<li>Banks will also be directed to close all accounts by the end of October next year should they fail to produce evidence of their application seeking authorisation.<\/li>\n<\/ul>\n<h2>Provisions for KYC Requirements<\/h2>\n<ul>\n<li>The purpose of the proposed regulations is to ensure that onboarded merchants do not collect and settle funds for services not offered on their platforms.<\/li>\n<li>While KYC is already mandatory, the regulations seek to extend the scope and make the provisions more nuanced.<\/li>\n<li>RBI\u2019s proposed instructions categorise merchants into small and medium merchants.<\/li>\n<li><strong>Small merchants<\/strong> would constitute physical merchants with an annual business turnover of less than \u20b95 lakh who are not registered under the <a href=\"https:\/\/vajiramandravi.com\/upsc-exam\/gst-council\/\" target=\"_blank\" rel=\"noopener noreferrer\" target=\"_blank\">Goods and Services Tax<\/a> (GST) regime.<\/li>\n<li>The regulator proposes that the PAs undertake \u2018contact point verification\u2019, that is, collect information physically to establish the existence of the firm.<\/li>\n<li>They must also verify the bank accounts in which their funds are settled.<\/li>\n<li><strong>Medium merchants<\/strong>, defined as physical or online merchants with annual business turnover of less than \u20b940 lakhs who are not registered under GST, would also have to undergo contact point verification.<\/li>\n<li>The PA would be expected to establish their existence by verifying one official document each of the proprietor, beneficial owner or attorney holder, and of the stated business.<\/li>\n<\/ul>\n<h2>Provisions for Data Privacy<\/h2>\n<ul>\n<li>The draft regulations instruct that no entity, other than the card issuer and\/or card network, can store data for proximity\/face to face payments from August 1, 2025, and direct them to purge data stored previously.\u00a0<\/li>\n<li>To track transactions and to reconcile them, entities would be allowed to store limited data, that is, the last four digits of the card number and the issuer\u2019s name.<\/li>\n<li>The onus for compliance in this domain would also be on card networks.<\/li>\n<\/ul>\n<hr \/>\n<h3>Q1. What is point of sales devices?<\/h3>\n<p>\u00a0A POS or point of sale is a device that is used to process transactions by retail customers. A cash register is a type of POS. The cash register has largely been replaced by electronic POS terminals that can be used to process credit cards and debit cards as well as cash.<\/p>\n<h3>Q2. What do you mean by RTGS?<\/h3>\n<p>Real-Time Gross Settlement (RTGS) is a funds transfer system where funds of high quantity are transferred from one bank to another in \u2018real-time\u2019 and on a gross basis.<\/p>\n<p><strong>Source: <\/strong><a href=\"https:\/\/www.thehindu.com\/business\/Industry\/rbis-latest-recommendations-to-regulate-payment-aggregators-in-offline-spaces-explained\/article68097451.ece\" target=\"_blank\" rel=\"nofollow noopener\">RBI\u2019s latest recommendations to regulate payment aggregators in offline spaces | Explained<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Payment Aggregators (PAs) are entities that facilitate online transactions<\/p>\n","protected":false},"author":5,"featured_media":40665,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-40664","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/40664","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=40664"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/40664\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/40665"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=40664"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=40664"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=40664"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}