Getting a licence for Pre-paid Payment Instruments in India.

 By Ameet Roy,( finserv@vinodkothari.com)

Payment systems in India are governed by the Payment and Settlement Systems Act, 2007 (PSS Act) and the RBI is the regulatory of all payment system India. All applications for granting of licence under the PSS Act has to be made to the RBI.

Under the guidelines for Issuance and Operation of Pre-paid Payment Instruments (PPIs) in India, an entity desirous of entering into business of issuance and operation of pre-paid payment instruments shall at all time maintain a minimum paid up capital of Rs. 5 Crore and positive net worth of Rs. 1 Crore.

An entity which fulfils the above mentioned capital requirements should file an application for grant of licence under the PSS Act on Form A (Application form for authorisation to set up payments systems) to the RBI with a nominal application fee of Rs. 10,000/-. On the form the entity should give all its details along with –

1. Citing concrete benefits to the financial system/ country from the operationalisation of the payment to be set up.
2. Experience of the applicants in the relevant field (the RBI seems very determined to allow operation of PPIs to serious and experienced persons in the field of payment systems).
3. Method of settlement of payment claims (gross / net / hybrid).
4. Details of bankers of the applicant entity.
5. Banker’s report on the functioning of the applicant account and its financial health.
6. Details of settlement agents for the proposed payment system.
7. Whether the settlement agent will act as central counterparty to provide guarantee.
8. Amount of finance required to execute the payment system project
9. Sources of finance –
   1. Amount of own capital proposed to be deployed
   2. Amount of borrowings expected from banks
   3. Amount of borrowing expected from sources other than banks (sources to be properly disclosed)
10. Rate of return on investment expected from the payment system sought to be set up
11. How does the applicant propose to recover its investment and earn an income, that is, whether through cash flows or by levying joining fees, security fees, annual/ operating charges etc.( full details to be given)

and various other information which will help the RBI assess the potential of the proposed business and its future prospects. The will only grant licence after being totally confident of the viability and security of the payment systems.

For help and assistance on the application of licence for setting up payment systems mail us at – finserv@vinodkothari.com