Source: BS
Context:
The Reserve Bank of India (RBI) has announced new guidelines allowing fully licensed payment aggregators (PAs) to expand into new segments, such as cross-border (CB) payments, with significantly streamlined approval processes.
Key Changes:
- Fast-Track Expansion:
- Fully licensed PAs can now commence operations in a new PA category by simply notifying the RBI 30 days in advance, compared to nearly one year previously for separate approvals.
- Scope of Expansion:
- Most fintechs start with a domestic PA license and later expand into PA-CB for cross-border payments.
- Compliance requirements for PA-CB are largely similar (≈80%) to a regular PA license.
- Certificate of Authorisation (CoA):
- Only PAs with a CoA issued by RBI can enter new categories.
- Notification must occur at least 30 days prior to commencing operations.
- Current Landscape:
- 56 fully licensed online PAs and 6 PA-CBs currently operate in India.
- PA-CBs handle cross-border transactions for imports and exports of permitted goods and services.
- Compliance and Oversight:
- PAs must actually engage in the new business; simply holding a license without operations is not allowed.
- All players remain subject to RBI audits.
- Relaxed norms come with the responsibility to demonstrate genuine business activity.
- Implications:
- Faster market entry could accelerate growth in lucrative cross-border payments.
- Streamlined approvals may increase competition in PA-CB space, which currently has higher margins due to fewer players.
- RBI retains oversight to mitigate risks to the broader payments ecosystem.
