To be sure, RBI in April had already said that non-banks would be allowed access to CPS viz. RTGS, NEFT in a phased manner. Till now, only banks were allowed to use RTGS and NEFT payments facilities.
In its latest circular, RBI said that Prepaid Payment Instrument (PPI) issuers, card networks, white label ATM operators are eligible to participate in the CPS in the first phase.
“On a review of extant arrangements and after detailed discussions with Payment System Providers (PSPs), it is advised that, in the first phase, authorised non-bank PSPs, viz. PPI Issuers, Card Networks and White Label ATM Operators shall be eligible to participate in CPS as direct members,” RBI said in a statement.
Apart from banks, very few select non-banks have been given approval to participate in CPS so far. The non-banks which are permitted membership/access to CPS are standalone primary dealers, clearing corporations of stock exchanges, central counter parties, retail payment system organisations, select financial institutions (NABARD, EXIM Bank) and DICGC.
Nature of transactions that can be executed shall depend upon the type of membership approved for RTGS. Based on the requirement, some categories of PSPs shall be permitted to participate in NEFT also.
The following are details of access for non-bank PSPs for CPS:
Once admitted as members, RTGS and NEFT systems may be used by the non-bank PSPs to execute various types of transactions.
A summary of different transaction types and their use-cases is given below:
i. RTGS/NEFT customer payments initiated by:
a. PPI issuers to merchants/payment aggregators;
b. WLA operators to agencies handling ATMs; and
c. Full-KYC PPI customers to load the PPIs from their bank account.
ii. RTGS inter-bank transfers initiated by:
a. Non-bank PSPs to maintain sufficient balance in their escrow account with member bank/s based on net debit or credit position; and
b. WLA operators and PPI issuers to other member banks / non-banks.
iii. Multilateral Net Settlement Batches (MNSB) posted in RTGS by:
a. Card networks for settlements, dispute management, annual fee collections, etc.;
b. Direct credit to WLA operators in NFS settlements; and c. NPCI allowing settlement of transactions of non-bank PSPs without involving their sponsor bank/s.
iv. Own Account Transfer (OAT) between the current and RTGS settlement accounts of the non-bank PSPs to maintain sufficient balances. 3.3.3 Card networks shall not be allowed to use the RBI current account for their settlement guarantee and related activities.
Moreover, for access to CPS, the non-bank PSPs shall fulfil the following criteria laid down by the central bank:
i. Valid Certificate of Authorisation (CoA) from Reserve Bank under the Payment and Settlement Systems Act, 2007 (PSS Act).
ii. Net-worth of ₹ 25 crore or as prescribed as per CoA, whichever is higher.
iii. Incorporation in India under the Companies Act, 1956 / 2013. Entities not fulfilling this requirement shall empower their Indian subsidiary / associate to enter into valid agreements with RBI.
iv. Implementation of centralised processing systems.
v. Adequate technical / system readiness including cyber resilience.
vi. Compliance with local payment data storage requirements issued by Reserve Bank from time to time.
vii. Adherence to Master Directions on Access Criteria for Payment Systems, RTGS System Regulations, NEFT Procedural Guidelines and other instructions prescribed by Reserve Bank from time to time.
viii. Satisfactory record of compliance to conditions laid out in CoA and regulatory guidelines. ix. Recommendations of the concerned regulatory / supervisory department of Reserve Bank.
Entities incorporated outside India shall empower their local offices to carry out all operations in respect of CPS, but the responsibility for all operations and management of any contingency, including settlement obligations, shall remain with the foreign parent institution, which has taken authorisation as PSP.
Reserve Bank shall have the authority to suspend or terminate membership of a PSP, if the PSP is found to be not complying with the access criteria on an ongoing basis, it added.
Non-bank PSPs shall not be eligible for availing Intra-Day Liquidity (IDL) facility from RBI. For any shortfall/default in completing the payment/settlement obligations, such entities shall approach their bankers for a ready line of 5 credit facility. They shall ensure that appropriate liquidity support arrangements are in place with their bankers to avoid gridlocks and to ensure business continuity.
Non-bank entities shall not be permitted to sponsor sub-members, as well as such banks shall adhere to the terms and conditions specified for maintenance of Current Account in Reserve Bank’s core banking solution (e-Kuber), membership to INFINET, use of SFMS, etc.
RBI also said that direct access for non-banks to CPS lowers the overall risk in the payments ecosystem. “It also brings advantages to non-banks like reduction in cost of payments, minimising dependence on banks, reducing the time taken for completing payments, eliminating the uncertainty in finality of the payments as the settlement is carried out in central bank money, etc,” the central bank further stated.
The risk of failure or delay in execution of fund transfers can also be avoided when the transactions are directly initiated and processed by the non-bank entities, it added.
Earlier, announcing the inclusion of non-banking systems, RBI governor Shaktikanta Das had said, “Membership to the RBI-operated Centralised Payment Systems (CPSs) – RTGS and NEFT – is currently limited to banks, with a few exceptions. It is now proposed to enable non-bank payment system operators like Prepaid Payment Instrument (PPI) issuers, card networks, White label ATM operators and Trade Receivables Discounting System (TReDS) platforms regulated by the Reserve Bank, to take direct membership in CPSs. This facility is expected to minimise settlement risk in the financial system and enhance the reach of digital financial services to all user segments.”
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