RBI Unveils Unified Framework For Payment System Operators, Norms Effective Immediately

New Delhi, Jun 18 (KNN) The Reserve Bank of India (RBI) has issued Master Directions on Authorisation to Operate a Payment System, consolidating several circulars and guidelines issued since 2015 into a single framework. 

The directions, issued under the Payment and Settlement Systems Act, 2007, have come into effect immediately and apply to both new applicants and existing Payment System Operators (PSOs).

The consolidation is part of a broader exercise by the RBI to enhance regulatory clarity and reduce the compliance burden on regulated entities.

Perpetual Validity and Stricter Governance

A significant change under the new framework is the shift to perpetual validity of Certificates of Authorisation (CoA) for PSOs, replacing the earlier renewal-based system. 

Perpetual licences will be subject to continued regulatory compliance, absence of major supervisory concerns and satisfactory inspection outcomes. 

Operators that do not meet these conditions will receive one-year renewals until compliance is achieved, failing which authorisation may be withdrawn.

The directions also strengthen fit-and-proper criteria for promoters, directors and group entities, covering financial integrity, criminal history, regulatory restrictions and overall soundness. Net-worth definitions have been standardised with detailed adjustments for capital, reserves and intangible assets.

Ownership Restrictions and Cooling Period

On ownership, the RBI has tightened norms for investments from jurisdictions on the Financial Action Task Force (FATF) non-compliant list, capping aggregate voting power at below 20 per cent and restricting the acquisition of significant influence in payment system operators.

The framework also introduces a mandatory one-year cooling period for entities whose authorisation is revoked, not renewed, voluntarily surrendered or rejected. During this period, such entities will be barred from reapplying, though the RBI retains the discretion to waive or shorten the period in exceptional cases.

Voluntary Surrender and Exit Process

The directions lay out detailed procedures for voluntary surrender of authorisation. Entities seeking to exit must settle all customer and merchant liabilities, maintain escrow transparency, issue public notices, submit progress reports and obtain a no-liability certificate from statutory auditors before closure. Unsettled claims may remain valid for up to three years following exit.

The RBI said the revised framework is aimed at strengthening oversight of payment system operators, improving financial system integrity and ensuring orderly entry, operation and exit of entities in the digital payments ecosystem.

(KNN Bureau)