The Reserve Bank of India (RBI), on October 31, 2023, issued a circular on ‘Regulation of Payment Aggregator – Cross Border (PA – Cross Border)‘ (PA – CB Directions). The PA – CB Directions mark a significant change from the existing regulatory framework governing the facilitation of cross-border payment transactions for import and export of goods and services.
Pertinently, the RBI, vide the PA – CB Directions, has now decided to bring all entities facilitating cross-border payment transactions for import and export of goods and services (PA – CBs) under the direct purview of regulations issued by the RBI. As a result, by virtue of the requirements introduced by the PA – CB Directions, all non-banking entities that facilitate cross-border payment transactions for import and export of goods and services, are required to seek specific authorization from the RBI in respect of such activities.
The PA – CB Directions also acknowledge that there are some non-banking entities that are currently undertaking cross-border payment facilitation activities and accordingly grants some transitory time period to make an application for authorization before RBI by April 2024 and permits them to undertake those activities until the disposal of approval application by RBI.
In terms of compliances and requirements to be adhered by PA – CBs, the PA – CB Directions inter alia require that:
- PA – CBs shall undertake customer due diligence of their merchants;
- Payments should be received in separate identified accounts (escrow account for import leg and export collection account for export leg); and
- PA – CBs must satisfy the specified net worth requirement (approx. USD 1.9 million USD, to be increased to approx. USD 3 million in a phased manner).