Offline Payment aggregators to be under regulatory scheme: RBI proposes amendments to PA regime

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Archisman Bhattacharjee and Manisha Ghosh I finserv@vinodkothari.com

Introduction

On April 16, 2024, the Reserve Bank of India (RBI) issued Draft Directions on the Regulation of Payment Aggregators (PAs) (‘Draft PA Directions’) serving two primary purposes:

  1. Regulating Offline PAs i.e. PAs operating at physical points of sale, an area previously not covered by existing regulations.
  2.  Amendments to the current guidelines concerning Payment Aggregators, primarily intended to extend the scope of the extant regulations to offline PAs; however, having several additionalities such as PA’s due diligence on the merchants, ongoing merchant monitoring based on business profile, disallowing payment to any other account on specific directions from the merchant etc.
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Introducing Financial Services on ONDC: Opportunities & Challenges for Digital Lenders

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– Shreshtha Barman | finserv@vinodkothari.com

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Snippet on Regulation of Payment Aggregator – Cross Border

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Shreshtha Barman and Tejasvi Thakkar| finserv@vinodkothari.com

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Our Resources on the topic :

  1. Understanding regulatory intricacies of Payment Aggregator business
  2. RBI to regulate operation of payment intermediaries
  3. Payment and Settlement Systems: A Primer

Digital Personal Data Protection Bill 2023:  Analysing the Impact on Digital Lenders

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– Subhojit Shome, Assistant Manager | subhojit@vinodkothari.com

Click here to view our: Consultancy and advisory services on Digital Personal Data Protection Act, 2023 

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Watch our Shastrartha on Digital Personal Data Protection Bill, 2023 – Analysing the impact on financial sector lender

Consultation paper on the proposed IFSCA (Payment Services) Regulations, 20XX: An Analysis

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By Anirudh Grover, Executive, finserv@vinodkothari.com

The International Financial Services Centre Authority in an attempt to restructure the regulatory overview of the Payment Services segment in GIFT IFSC has issued a Consultation Paper dated June 13, 2023 (‘CP’), along with the draft regulations that will be applicable to the payment services market in GIFT IFSC. The aim of this write-up is to critically analyze the same with comparisons with the current RBI framework and similar guidelines practiced by regulators globally.  

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Inter-operable regulatory sandbox: A playground for fintechs ?

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– Dayita Kanodia, Executive | finserv@vinodkothari.com

A regulatory sandbox allows live testing of innovative products/services under regulatory supervision and with regulatory relaxations. This in turn allows regulators to design evidence-based and innovation-friendly regulations.

An Inter-Operable Regulatory Sandbox or IoRS as defined by both RBI and SEBI is therefore a mechanism to facilitate testing of innovative hybrid financial products / services falling within the regulatory ambit of more than one financial sector regulator.

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FAQs on Default Loss Guarantee in Digital Lending

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An understanding of the Guidelines issued by RBI

Team Finserv | finserv@vinodkothari.com

On September 02, 2022, the RBI issued the “Guidelines on Digital Lending” (“DL Guidelines”), which had essentially put a bar on “Loss sharing/ structured default guarantee arrangements” such as First Loss Default Guarantees, likening their nature to that of “synthetic securitisation” as defined under the Master Direction – Reserve Bank of India (Securitisation of Standard Assets) Directions, 2021 (“SSA Directions”). This caused a disruption in the digital lending industry as most of the arrangements ran on some form of loss-sharing arrangement. (Refer to our FAQs on the Digital Lending Guidelines here)

In its Statement on Developmental and Regulatory Policies dated June 8, 2023, the RBI announced its intention to issue a regulatory framework for permitting Default Loss Guarantee arrangements in Digital Lending[1]. The same day, the Guidelines on Default Loss Guarantee (DLG) in Digital Lending have been issued by the regulator (‘DLG Guidelines’).

We have developed a set of FAQs on the DLG Guidelines, where we intend to answer some of the critical questions relating to the default guarantee arrangements.

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RBI to release guidelines to permit default guarantees

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The evolution of a concept, from its inception to being prohibited, and ultimately establishing a regulatory framework to allow its practice

– Anita Baid (finserv@vinodkothari.com)

The concept of First Loss Default Guarantees (FLDGs) in the financial industry has experienced a remarkable journey, marked by its inception, subsequent prohibition, and eventually being on the verge of a resurgence with the introduction of a regulatory framework. It had gained significant attention in the realm of fintech industry, whose remarkable expansion in India is largely responsible for propelling FLDGs. Nevertheless, it is essential to note that guarantees are not a novel concept; they have been widely employed in the financial sector for a considerable period of time. (Our article on ‘Lending without risk and risk without lending’ can be read here)

In its Statement on Developmental and Regulatory Policies dated June 8, 2023, the RBI has announced its intention to issue a regulatory framework for permitting Default Loss Guarantee arrangements in Digital Lending. This article delves into the intriguing evolution of Structured Default Guarantees, examining their rise, fall, and subsequent rebirth, shedding light on the regulatory landscape that has shaped their existence.

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Crowdfunding platforms – risks and concerns in the Indian context

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Timothy Lopes, Manager

finserv@vinodkothari.com

Introduction

Crowdfunding as a concept has been in the limelight for quite some time now. Globally there are several crowdfunding platforms that exist. These crowdfunding platforms essentially allow almost anybody to raise funds for any cause, ideas or business ventures. Interestingly, the first online crowdfunding platform was launched back in 2001[1].

However, with the advent of online crowdfunding platforms also comes the inherent risks associated with it. Through this article, the author aims to highlight the inherent risks associated with crowdfunding along with the legal permissibility and restraints in India.

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Ushering the new-age TReDS Platform

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– Anirudh Grover, Executive | finserv@vinodkothari.com

Receivables or debtors though from the face of it is considered as a positive thing for businesses, however when you lift the tag of positivity one can assess the true color of trade receivables. This essentially means that despite it being classified as an asset it may not be helping the business when required. For instance, ABC Ltd has 1 lakh recorded as debtors in its financials however these debtors are of no substantial use unless it is converted into liquid forms of funds. This in essence is the reason why TReDS was introduced, RBI vide Guidelines for the Trade Discounting System (TReDS) opined that the scheme for setting up and operating the institutional mechanism for facilitating the financing of trade receivables of MSMEs from Corporate and other buyers, including Government Departments and Public Sector Undertakings (PSUs), through multiple financiers is known as TReDS.

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