The Reserve Bank of India (RBI) issued the Master Directions on Authorisation to Operate a Payment System on Monday, consolidating existing guidelines governing payment system operators (PSOs) under a unified regulatory framework. According to reports from Business Standard, the directions take immediate effect and cover comprehensive aspects including eligibility criteria, authorisation procedures, perpetual validity of licences, voluntary surrender of authorisation and cooling-off requirements for payment system operators.
Under the new framework, authorisations granted to new payment system operators will be valid on a perpetual basis, as reported by Business Standard. Existing operators may also be granted perpetual validity when their certificates of authorisation come up for renewal, provided they comply with all regulatory requirements and do not face supervisory concerns. Operators that fail to meet these conditions may be granted one-year renewals until the identified deficiencies are rectified.
The directions continue to restrict investments originating from jurisdictions identified by the Financial Action Task Force (FATF) as non-compliant with anti-money laundering and counter-terror financing standards, according to Business Standard. Under the revised framework, new investors from such jurisdictions will not be permitted to acquire significant influence in payment system operators, with the aggregate voting rights of such investors capped below 20 per cent.
The RBI has retained its on-tap authorisation mechanism, allowing entities to apply for payment system licences throughout the year, as reported by Business Standard. Entities seeking authorisation will be required to submit applications through the RBI's designated portal and comply with capital and net-worth requirements prescribed for specific categories of payment systems. Applicants must also satisfy the regulator's 'fit and proper' criteria relating to integrity, financial soundness, governance standards and management suitability.
The master directions set out a detailed process for the voluntary surrender of authorisation, with payment system operators seeking to discontinue operations required to settle all outstanding liabilities owed to customers, merchants, agents and banks before surrendering their licences, according to Business Standard. Such entities will also be required to obtain auditor-certified confirmation of such settlements before surrendering their licences. The framework introduces cooling-off periods of one year for entities whose authorisation has been revoked, not renewed, voluntarily surrendered or whose application has been rejected, during which they will not be eligible to apply for fresh authorisation to operate any payment system.
