RBI issues norms to regulate 'Cross-Border Payments Platforms'

Keeping in view the developments that have taken place in the area of cross-border payments, RBI has now decided to bring all entities facilitating cross-border payment transactions for import and export of goods and services ?will come under its direct regulation and will be clubbed under ‘Payment Aggregator-Cross Border’ (PAs-CB) class.

The RBI also directed all relevant stakeholders involved in the settlement and processing of cross-border transactions for the import and export of goods and services, including authorised dealer (AD) banks, PAs and PAs-CB, to comply with certain rules and regulations.?

RBI directed all ‘non-banks’ to apply for authorisation from RBI by April 30, 2024. The licences will allow stakeholders such as cross-border payment startups to offer services and will span three categories – import only, export only, and both import as well as export.?

In the meanwhile, startups will be allowed to offer such services till further communication from RBI on their pending applications.?

RBI has also set a host of requirements for applicants seeking cross-border payment licences. As a prerequisite, startups and other non-banks already offering such services, at the time of the circular, will be mandated to register themselves with the Financial Intelligence Unit-India (FIU-IND).

Besides, the RBI has also set a minimum net-worth threshold of INR 15 Cr at the time of submitting the application.?By March 2026, RBI mandates that these platforms have to have a minimum net worth of INR 25 Cr for authorisation to offer such services.

In respect of import and export transactions processed by PA-CBs, the maximum value per unit of goods / services sold / purchased shall be ?25,00,000.

RBI circular further mentions that in the case of imports only PA-CBs, if per unit goods/services imported is more than ?2,50,000, then the concerned PA-CB shall undertake due diligence of buyer too. Also, payments for imports can be carried out using any payment instrument provided by authorised payment systems in India, except small PPIs.

For export-only PA-CBs, the settlement in non-INR currencies shall be permitted only for those merchants which have been directly onboarded by the PA-CB.

The central bank also warned platforms that those not complying with the net-worth rules will have to cease offering cross-border payment services by July 31, 2024.?

The RBI, in its circular, also laid procedures for the handling of online transactions by the PAs. It also said banks undertaking PA-CB activity need to fulfil the requirements for ?PA-CBs by April 30, 2024.

All other instructions issued by the RBI regarding PAs shall apply mutatis mutandis to PA- CBs.

For PA-CB transactions, AD banks maintaining ICA / ECA shall ensure that all requirements under FEMA, including for reporting and reconciliation of entries in EDPMS / IDPMS, are adhered to.

Global cross-border payment transaction flows continue to see heavy traction and saw a remarkable 13% increase from 2022, as per the Global Payments Report. The driving force behind this surge has largely been global interoperability and initiatives such as immediate cross-border payments (IXB), and unified payments interface (UPI).

As per a report, the global cross-border payments market is projected to grow to a market size of $ 238.9 Bn by 2027.