RBI To Directly Regulate Entities Facilitating Cross Border Payment Transactions
In a recent circular, Reserve Bank of India (RBI) has announced its decision to directly regulate all entities that facilitate cross-border payment transactions related to the import and export of goods and services. This directive is aimed at ensuring transparency, security, and adherence to financial regulations in these cross-border transactions.
The RBI, in its circular, introduced a novel category known as Payment Aggregator-Cross Border (PA-CB) to encompass all entities involved in facilitating cross-border payments. This move comes in response to the evolving landscape of cross-border payments, which has witnessed significant growth and transformation in recent years. The RBI now seeks to bring these entities under its direct regulatory purview to maintain the stability and integrity of the financial system.
To strengthen the regulatory framework, the RBI clarified the minimum net worth criteria for non-bank entities providing PA-CB services. According to the circular, entities applying for authorization to operate as PA-CBs must have a minimum net worth of ₹15 crore at the time of application. Additionally, they are required to maintain a minimum net worth of ₹25 crore by March 31, 2026, demonstrating their financial stability and commitment to the industry.
The circular issued by the RBI also outlines the procedures for handling online transactions by Payment Aggregator-Cross Border entities. These procedures are designed to ensure that transactions are carried out in a secure and compliant manner, safeguarding the interests of both merchants and customers. This is a crucial step to prevent fraudulent activities and maintain the integrity of the cross-border payment ecosystem.
In a bid to further streamline cross-border transactions, the circular specifies a maximum value per unit of goods or services sold or purchased through PA-CBs. The maximum value has been capped at ₹25,00,000, ensuring that smaller transactions are appropriately regulated while larger transactions may require additional scrutiny and due diligence.
The circular also imposes obligations on banks that engage in Payment Aggregator-Cross Border activities. Banks undertaking these activities must fulfill the regulatory requirements applicable to PA-CBs by April 30, 2024, ensuring that all entities involved in cross-border transactions adhere to the same standards, regardless of their nature.
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