RBI Allows On-Tap Licensing In Three Payments Categories

The central bank decided to offer on-tap authorisation for new payments services providers in three categories to encourage competition and innovation.

The licences will be issued to new players for providing services through Bharat Bill Payment Operating Unit System or Trade Receivables Discounting System or to set up white-label automated teller machines, according to a Reserve Bank of India’s statement on Oct 15.

The central bank had in January released a policy paper on authorising new players in the retail payments system to reduce concentration risk and encourage innovation. In August, the RBI said it will issue guidelines from new operators based on feedback.

According to the RBI’s on-tap licencing norms, all new operators in the three categories will need to follow the know-your-customer guidelines as prescribed by the central bank depending on the area of operation. They have to ensure interoperability between their platform and other retail payment systems, the RBI said.

• Here’s the requirement for each of three categories:
• Bharat Bill Payment Operating Unit: Minimum net worth of Rs 100 crore and domain experience in bill payments and bill collections for a minimum of one year.
• Trade Receivables Discounting System: Minimum paid-up equity capital of Rs 25 crore and non-promoter shareholding should be up to 10 percent of the equity capital.
• White-Label ATMs: Minimum net worth of Rs 100 crore and should deploy ATMs in a 1:2:3 ratio between metro and urban areas, semi-urban areas and rural regions.

The ratio of ATM deployment will be in favour of rural regions, the RBI said, adding that if an “operator deploys adequate ATMs in a rural region, it need not deploy ATMs in metro, urban or semi-urban regions to meet the ratio requirements”.

But if the operator deploys ATMs in a semi-urban region, it will need to set up an adequate number of ATMs in a rural region as per the mandated ratio and may not need to deploy any ATMS in metro or urban regions, it said.

Only companies registered under the Companies Act 2013 can apply, provided they meet the ‘fit and proper’ criteria of the central bank. The new entrants will need to demonstrate overall financial strength of the promoters and the entity as well as their technological basis to support the payments operations, management and governance aspects.

Entities with foreign direct investment, foreign portfolio investment or foreign institutional investment have to meet capital requirements applicable under the consolidated FDI policy guidelines.