RBI streamlines payment system authorisation rules, grants perpetual validity to compliant operators
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The Reserve Bank of India (RBI) on Monday unveiled a consolidated regulatory framework for payment system operators (PSOs), bringing together multiple guidelines issued over the past decade into a single set of master directions aimed at simplifying compliance and improving regulatory clarity.
The central bank issued the “Master Directions on Authorisation to Operate a Payment System”, which take immediate effect and cover key aspects such as authorisation procedures, perpetual validity of licences, voluntary surrender of authorisation, investment restrictions, and cooling-off requirements. The move comes as India’s digital payments ecosystem continues to expand rapidly, with an increasing number of entities seeking approval to operate payment systems.
One framework replaces seven separate sets of guidelines
The master directions consolidate provisions that were previously spread across seven circulars and guidelines issued between 2015 and 2023, including norms relating to net-worth computation, on-tap authorisation, perpetual validity of licences, cooling-off periods, and voluntary surrender of authorisation.
Explaining the rationale behind the move, the RBI said in an official statement, “This consolidation exercise is carried out in continuance with similar exercise being carried out by various departments of RBI to enhance clarity, ease of access, and reduce the compliance burden of the regulated entities.”
The regulator said the unified framework is intended to provide greater consistency and ease of reference for both existing operators and prospective applicants.
Permanent authorization for payment service providers
A key feature of the framework is the continuation of perpetual validity for certificates of authorisation granted to payment system operators. New entities receiving authorisation from the RBI will be granted licences with perpetual validity, subject to continued compliance with regulatory requirements.
Existing operators will also become eligible for perpetual validity when their certificates come up for renewal, provided they meet all regulatory conditions and do not face supervisory concerns. Operators that fall short of prescribed requirements may continue to receive one-year renewals until deficiencies are addressed.
The directions also retain the on-tap authorisation mechanism, allowing eligible entities to apply for approval throughout the year through the RBI’s portal. Applicants will be required to meet prescribed capital and net-worth requirements as well as the regulator’s “fit and proper” criteria covering integrity, governance standards and financial soundness.
Restrictions associated with the FATF remain in place
The RBI has retained restrictions on investments originating from jurisdictions identified by the Financial Action Task Force (FATF) as non-compliant with anti-money laundering and counter-terror financing norms. Investors from such jurisdictions will not be permitted to acquire significant influence in payment system operators, with aggregate voting rights capped below 20%.
The framework also lays down a detailed process for voluntary surrender of authorisation and empowers the RBI to impose a one-year cooling-off period on entities whose licences have been revoked, not renewed, voluntarily surrendered, or whose applications have been rejected before they can seek fresh authorisation.