RBI to revise export-import payments aggregation framework
On 7th April 2022, the Reserve Bank of India (RBI) released Draft Guidelines for the Processing and Settlement of Payments Related to Low Value Exports and Imports Facilitated by Online Import-Export Facilitators (OEIFs) (draft guidelines). The draft guidelines streamline the regulatory framework for Online Payment Gateway Service Providers (OPGSPs) and facilitate low-value export and import transactions, given the evolving e-commerce ecosystem. The RBI has sought comments on the draft guidelines ahead of issuing revised guidelines to regulate OEIFs, which will replace existing rules for the processing of low value export and import payments by OPGSPs.
The draft guidelines define OEIFs as payment aggregators or payment gateways that facilitate online remittances for low-value exports and imports of digital goods and products through e-commerce. The draft guidelines state that an OEIF, which facilitates payments for import transactions, acts as a payment aggregator and is required to obtain permission from the RBI under the Systems Act 2007. of payment and settlement (PSS law). An OEIF that facilitates payments for export transactions acts as a payment gateway and does not require authorization from the RBI. As with all payment gateways, these entities must comply with the basic technology recommendations contained in the RBI’s Guidelines on the Regulation of Payment Aggregators and Payment Gateways dated 17 March 2020, as clarified by the RBI on March 31, 2021 (PA/PG guidelines).
The RBI has increased transaction limits to $3,000 from $2,000 for imports and $15,000 from $10,000 for exports. For export transactions, the RBI has reduced the time period within which funds from the nostro account maintained by the Approved Concessionaire Bank (AD Bank) outside India must be transferred to the bank account of the relevant exporter in India . This period has been reduced from seven to five days from the date of credit to the nostro account.
The OEIF partner AD bank is now required to perform reconciliation and audit of import and export collection accounts on a monthly basis, instead of quarterly, as prescribed by the existing RBI instructions for the settlement of transactions via OPGSPs. OEIFs must undertake appropriate due diligence and ensure compliance with RBI Know Your Customer (KYC), Anti-Money Laundering and Anti-Terrorist Financing standards before onboarding merchants.
The draft guidelines are aligned with the RBI’s general position of moving from a simplified approach to a fully-fledged licensing regime for payment aggregators, as introduced by the PA/ PG. The draft guidelines, however, make a distinction between OEIFs that facilitate import transactions and those that facilitate export transactions. The logic seems to be that OEIFs that facilitate import transactions typically interface with retail buyers in India and aggregate direct payments in relation to them. OEIFs that only facilitate export transactions will generally not interface directly with Indian retail buyers but with traders in India. The retail side of the transaction for these OEIFs is with overseas buyers. The rule requiring OEIFs that facilitate import transactions to obtain permission from the RBI under the PSS Act parallels the exemption available for e-commerce marketplaces not undertaking payment aggregation direct and operating through third-party licensed payment aggregators. These platforms aggregate payments for settlement with merchants, much like OEIFs which only facilitate export transactions.
In order to facilitate import operations, OEIFs will need to obtain permission from the RBI under the PSS Act. An offshore organization intending to do business as an OEIF to facilitate import transactions will need to set up a company incorporated in India in order to apply for authorization from the RBI. Setting up a liaison office as required by the existing RBI guidelines will no longer suffice.
The licensing requirement will trigger know-your-customer and reporting obligations for OEIFs facilitating import transactions. Clarifications on the scope of these obligations in the final guidelines will be useful.
Shilpa Mankar Ahluwalia is Partner and Head (Fintech Practice) and Himanshu Malhotra is Senior Partner at Shardul Amarchand Mangaldas & Co.
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