RBI guidelines for Non-bank payment system operators (PSOs) 

RBI guidelines for Non-bank payment system operators (PSOs) 

Subject: Economy

Section: Banking

Context:

The RBI recently reviewed the operations of Non-bank payment system operators (PSOs) authorised to operate any payment system by it.

Details:

• Non-bank payment system operators (PSOs) will require prior approval of the RBI for any takeover or acquisition of control which may or may not result in change of management.
• It would also require prior approval of the RBI for sale or transfer of payment activity to an entity not authorised for undertaking such an activity.
• The RBI shall respond within 45 calendar days after receipt of complete details from both the entities. However, the timeline is not applicable in case of overseas principal in the Money Transfer Service Scheme.
• The non-bank PSOs shall inform the RBI within 15 calendar days in the following cases:
  • change in management or directors and
  • sale or transfer of payment activity to an entity authorised for undertaking similar activity.
• This directive is issued under Section 10 (2) read with Section 18 of Payment and Settlement Systems Act, 2007. 

Concept:

Payment System

• A payment system is a system used to settle financial transactions through the transfer of monetary value and consist of the various mechanisms that facilitate the transfer of funds from one party (the payer) to another (the payee).
• A payment system includes the participants (institutions) and the users (customers/clients), the rules and regulations that guide its operation and the standards and technologies on which the system operates
• The Board for Regulation and Supervision of Payment and Settlement Systems (BPSS), a sub-committee of the Central Board of the RBI is the highest policy making body on payment systems in India.

Payment System Operators (PSOs)

PSOs by virtue of services they provide and the construct of models on which they operate, largely outsource their payment and settlement-related activities to various other entities.

It is an institution which has been granted an authorisation for the operation of a payment system.

A payment system operator means a legal entity responsible for operating a payment system. The PSO provides services by operating on certain models. They largely outsource their payment and settlement-related activities to various other entities. Examples of PSOs include Google Pay, Amazon Pay, NPCI, Paytm etc.

Non-banks payment system operators (PSOs) include entities like Payment System Providers (PSPs) and Non-Banking Financial Companies (NBFCs) that are regulated by the Reserve Bank as also entities that are under the remit of other financial sector regulators like PFRDA, IRDAI, SEBI, etc.