Regulations on Prepaid Payment Instruments -Comparing the Master Circular and Master Directions

/0 Comments/in , , , /by

By Anita Baid, (finserv@vinodkothari.com)

With an enlarged view of the Government to make India go cashless and straddle towards the concept of digitalisation, many companies, specifically NBFCs are seeking approval from the Reserve Bank of India (RBI) to set up business in Prepaid Payment Instruments (PPI). Before getting into the present regulatory framework of such PPIs, one needs to understand the concept of such instruments. PPIs are a form of digital electronic instruments. PPI issuers open an account for its account holders known as PPI holders and with the help of such account, withdrawal/ deposit is made for some pre-ascertained payments or receipt. A certain amount is deposited into such PPI Account from the holder’s Bank A/c and using the balance deposited in the PPI Account, payments are made and/or even cash is received. The introduction of such mechanism enables a person to go cashless. Such PPI instruments can be of three types: Read more →

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

/0 Comments/in /by

 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

Overview of Regulatory Framework of Payment and Settlement Systems in India by Anita Baid

/0 Comments/in /by

Introduction

It has been a while that there has been a buzz around the emerging concept of financial technology (fintech), which seems to be evolving at an unimaginable speed. The technological development taking place globally, have compelled the traditionally cash-driven Indian economy to respond promptly to the fintech opportunities. The modern payment systems have overcome the shortcoming of the traditional mode of cash based payments where handing of cash was the most cumbersome part of all transaction. It is a known fact that the overall economic efficiency and stability of any country is dependent on the payment and settlement system in that country. As a result, the regulators in our country, including the central bank, have also been revisiting their operating model and policies regularly, to ensure and carry out the development of national payment systems. The regulators have to closely safeguard the sanctity of payment systems, primarily from the viewpoint of systemic risk, risk of fraud, etc. Specifically, it is the responsibility of the central bank of any country, that is to say the Reserve Bank of India (RBI) for our country, to ensure and carry out the development of national payment systems.

This article is intended to provide a panoramic view of the schematics of regulation over Indian payment and settlement systems.

Read more →

Stringent norms ahead for the issuers of Pre-paid Payment Instruments (PPIs) in India, Kirti Sharma

/0 Comments/in /by

Introduction

India Inc is witnessing a major shift from cash driven economy to a cashless economy with a steep rise in the mobile transaction services through digital payment modes in the financial technology industry undoubtedly pushing huge pressure on cash. The payment industry is striving to become an integral part of the economy. With the evolution of online wallets, consumers are provided with simpler and more efficient method to complete online transactions Read more →

Reforms to hit the Prepaid Payment Instrument issuers hard, by Ameet Roy

/0 Comments/in /by

The financial year 2017-18 is all set to bring in an array of reforms thought the Indian economy, all aimed to achieve one thing and one thing only – turn India into a 21st century super economy . Where business would be able to run without any hurdles involving regulatory, technological, man power, etc.

As India enters into the transformation stage into a super economy, new challenges have started to surface for the regulators, keeping the economy on track to achieve the national goal is of primary concern in this crucial stage. One of the many such challenges is the concern regarding the new age payments Read more →