Mumbai, Feb 21 (KNN) Payment service provider is ‘entrusted’ with money, and therefore “fit and proper” criterion is of utmost importance and consequently, “free entry” based on tick-box exercise will be a risky phenomenon, RBI’s Deputy Governor R Gandhi said on granting licence.

"There is an implied suggestion that this (payment) sector needs to be freed of licensing mechanism and once a set of criteria are fixed, any number of entities meeting those criteria should be allowed to function. We differ from this idea," Gandhi said.

He was speaking at the launch of BharatQR, an inter-operable payment solution, in the city on Monday.

"Such a free entry may not be appropriate for payment industry,” Gandhi opined.

He said there is a misconception that non-bank entities are being discriminated as compared to the banking entities in the payment system arena.

He clarified that RBI, as a payment system regulator, has opened up the space of non-bank entities and given them access to various payment systems.

"We have been opening up the space and allowing entry to non-bank entities. At the origination, in between originating bank and destination bank and at the receiving end, there is no restriction for a non-bank entity to be present," the Deputy Governor said.

Quoting examples, Gandhi said Prepaid Payment Instrument (PPI) issuers, Bharat Bill Payment System (BBPS) operating units, Trade Receivables Discounting System (TReDS), White Label ATMs (WLAs) and payment aggregators where non-bank entities are operating.

He said there has been some criticism over RBI not allowing non-bank entities to keep bank accounts.

Many mobile phone companies do feel they can offer account-based payment service, he further said.

"If you maintain a bank account, then you are a bank and you need a banking licence. When you keep the money of the public in account, you are a financial entity taking deposits and you must be public trustworthy and so be regulated as a deposit taking financial entity," Gandhi said justifying RBI's stand on not allowing non-bank entities to keep bank accounts.

Gandhi launched the BharatQR, an inter-operable and low cost payment acceptance solution, developed by National Payments Corporation of India (NPCI), Mastercard, and Visa.

In his concluding remarks, the RBI Deputy Governor said the Reserve Bank remains committed to play a catalytic and facilitating role for enabling innovations in payment systems arena, while performing its responsibilities as a regulator and supervisor of payment systems for ensuring their safety, security and soundness, along with customer protection. (KNN Bureau)