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Regulation of Payment Aggregators

By - Amrutha Babladi on September 19, 2022

Regulation of Payment Aggregators

The Reserve Bank of India (‘RBI’), via a notification, has provided relief to online non-banking Payment Aggregators (‘PAs') to submit applications seeking authorization till September 2022 under the Payment and Settlement Systems Act, 2007 (‘PSS Act’).

Earlier, the applications from some PAs were returned as they had not met certain criteria, such as having a minimum net worth of INR 15 crore by March 31st 2021. It was implied that they should discontinue their operations within 6 months from the date of return of their application. Even though they have an option to submit a fresh application on meeting the criteria, ceasing the operations may lead to disruption in payment systems.   

The RBI has given a breather to the PAs, keeping in view the disruption caused by COVID-19, to ensure the smooth functioning of payment ecosystems.  

The PAs can apply by September 30th 2022 and must have a net worth of INR 15 Crore as of March 2022. They shall be permitted to continue their operations till they receive communication from RBI regarding the fate of their application. However, the deadline of March 31st 2023 for achieving a net worth of INR 25 Crore shall remain.

PAs: PAs are the entities that facilitate e-commerce sites and merchants to accept various payment instruments from customers for the completion of their payment obligations without the need for merchants to create a separate payment integration system of their own. PAs facilitate merchants to connect with acquirers. In the process, they receive payments from the customers, pool and transfer them to the merchants after a certain time period.  

  2. Sheetal Agarwal, Associate 

To allow non-residents to invest in specified securities issued by the Government of India, the Reserve Bank, in consultation with the Government of India, introduced a different channel known as the ‘Fully Accessible Route’ (FAR) to broaden the selection of government securities as well as increase liquidity across the sovereign yield curve. The eligible investors may invest in certain specified government securities without any investment restrictions. 

There are three different investment options available to foreign portfolio investors (FPIs). These include the Medium-Term Framework (MTF), introduced in October 2015, the Voluntary Retention Route (VRR), introduced in March 2019, and the Fully Accessible Route (FAR), introduced in April 2020. To promote foreign portfolio investment, the following adjustments are being made to the regulatory framework governing FPI investment in debt flows: 

  • All Central Government securities with 5-, 10-, and 30-year tenors are currently classified as ‘specified securities’ under the Fully Accessible Route (FAR). In addition, it has also been decided that all new issuances of government securities of 7-year and 14-year tenors, including the current issuances, will also be designated as specified securities under the FAR.
  • A macro-prudential short-term limit, which does not allow more than a 30% stake of investments in government securities and corporate bonds can have a residual maturity of less than one year, currently applies to FPI investments in government and corporate debt under the Medium-Term Framework. It has been decided to exempt investments from these short-term restrictions made by FPIs in corporate debt and government securities made up until October 31st 2022. These 

investments will not count toward the short-term limit until they mature or are sold.

FPIs can only invest in corporate debt instruments with a residual maturity of at least one year as part of the macro-prudential framework under the Medium-Term Framework. It has been decided to give FPIs a small window up until October 31st 2022, during which time they can invest in corporate money market instruments, such as commercial paper and non-convertible debentures with an original maturity of up to one year. FPIs are permitted to hold onto their investments in these instruments until their maturity or sale. These investments will not be taken into account when calculating the short-term investment cap for corporate securities.

The list of ‘specified securities’ under FAR with effect from April 1 2020 is as follows:

SL. No.ISINSecurity
 1IN00201903966.18% GS 2024
 2IN00201804887.32% GS 2024
 3IN00201903626.45% GS 2029
 4IN00201804547.26% GS 2029
 5IN00201900327.72% GS 2049

The list of additional ‘specified securities’ eligible for investment under FAR is as follows:

SL. No.ISINSecurity
 1IN00202200117.10% GS 2029
 2IN00202200297.54% GS 2036

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