RBI removes rules requiring payment cos to submit returns on their operations

Mumbai: As part of a major change in payment regulations, the RBI has removed rules requiring payment operators to submit statements relating to their activities and operations to the central bank.
“The amendments are made with the aim of reducing the compliance burden on regulated entities (REs) by streamlining certain returns prescribed in the PSS Regulations,” the RBI said in a statement. The amendment was put into effect by notification to the official gazette last month. The RBI announced changes to its regulations on Thursday.
One of the key changes is that RBI will now refer to entities operating in the payments space as “system participants” as opposed to “system providers” previously. Previously, payment system providers were required to provide monthly statements containing the number of participants in the payment system operated, payment instructions processed both in terms of volume and value, and the number of instructions returned with reasons.
Previously, they were also required to provide details of reportable defaults by system participants on the date of occurrence. Providers were required to submit to the RBI a quarterly bankers’ attestation on the operation of their accounts. In addition to this, they had to provide information relating to disputes, staff numbers, income and expenses, and changes in shareholding.
While this is positive for payments companies, some bankers believe that the RBI could now start treating these entities as companies to which banks outsource activities. “The previous approach was that of a regulator who wants to keep an eye on everything that is going on. Now what they’re saying is we don’t want anything,” a banker said.
RBI’s position is growing in importance given that some payment providers hold a disproportionate share of the market. For example, the bulk of UPI transactions processed in the country are routed through PhonePe and Google Pay. Some companies believe that the RBI should play a bigger role in regulating the payment space, as there is currently no self-regulation and most players see themselves as technology companies.
Although RBI has ceased to require the seven statements mentioned previously, it still requires them to submit a copy of its audited balance sheet as of the last date of the relevant year, together with a copy of the profit and loss account for the year and a copy of the auditor’s report. It also states that system providers will be required to submit returns to RBI as requested by the central bank from time to time.

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Elaine R. Knight