wordpress blog stats
Connect with us

Hi, what are you looking for?

PayPal Issue: The RBI Notification Applicable To Online Payment Gateways

Paypal, as readers may remember, recently announced that starting March 1st, it would limit receipt of payments to $500 for users in India, not allow online transactions with the money received, and that withdrawals to banks would need to be made within seven days. Paypal said that this was in line with guidelines issued by the RBI, but it did not share the details.

As per the guidelines (a copy below), issued on November 16th 2010, the RBI found that Online Payment Gateway Service Providers “have not only facilitated conclusion of the transactions but also allowed exporters to retain the export proceeds abroad without repatriation resulting in violation of the provisions of FEMA, 1999.” The note suggests that the RBI, instead of barring the services, rationalized that the services provided by the Online Payment Gateways to the exporters are important, and issued guidelines to cover e-commerce arrangements. According to the guidelines:

– Authorised Dealer Category- l banks are being allowed to offer repatriation of export related remittances by entering into arrangements with Online Payment Gateways, after carrying out due diligence
– This facility shall only be available for export of goods and services of value not exceeding $500
– The banks will open a NOSTRO collection account for receipt of the export related payments:
– Exporters will have to open an account with the Online Payment Gateway, but no funds are allowed to be retained in such accounts
– Repatriation of funds representing export proceeds to India for credit to the exporters’ account, in no case, later than seven days from the date of credit to the NOSTRO collection account.
– The bank will have to ensure that purpose codes are reported to the RBI
– Resolution of all payment related complaints of exporters in India shall remain the responsibility of the Online Payment Gateway

Copy of the circular (source)

RBI/2010-11/281
A.P. (DIR Series) Circular No. 17

Advertisement. Scroll to continue reading.

November 16, 2010

To

All Category – I Authorised Dealer Banks

Madam / Sir,

Of late, Online Payment Gateways have emerged as a popular mode of facilitating e-commerce transactions. Some of these Online Payment Gateway Service Providers (OPGSPs) have also been facilitating cross-border transactions. We have recently reviewed the service model provided by these OPGSPs with reference to the provisions of the Foreign Exchange Management Act (FEMA), 1999. It was observed that a few OPGSPs have not only facilitated conclusion of the transactions but also allowed exporters to retain the export proceeds abroad without repatriation resulting in violation of the provisions of FEMA, 1999. Acknowledging however the importance of the services provided by the OPGSPs to the exporters, particularly in facilitating small value export transactions, it has been considered necessary to issue a set of guidelines to cover such e-commerce arrangements.

2. Accordingly, it has been decided to allow the Authorised Dealer Category- l (AD Category-l) banks to offer the facility of repatriation of export related remittances by entering into standing arrangements with OPGSPs, subject to the following conditions:

Advertisement. Scroll to continue reading.

(i) The AD Category-I banks offering this facility shall carry out the due diligence of the OPGSP.

(ii) This facility shall only be available for export of goods and services of value not exceeding USD 500 (US Dollar five hundred).

(iii) AD Category-I banks providing such facilities shall open a NOSTRO collection account for receipt of the export related payments facilitated through such arrangements. Where the exporters availing of this facility are required to open notional accounts with the OPGSP, it shall be ensured that no funds are allowed to be retained in such accounts and all receipts should be automatically swept and pooled into the NOSTRO collection account opened by the AD Category-I bank.

(iv) A separate NOSTRO collection account may be maintained for each OPGSP or the bank should be able to delineate the transactions in the NOSTRO account of each OPGSP.

(v) The following debits will only be permitted to the NOSTRO collection account opened under this arrangement:

a) Repatriation of funds representing export proceeds to India for credit to the exporters’ account;

Advertisement. Scroll to continue reading.

(b) Payment of fee/commission to the OPGSP as per the predetermined rates / frequency/ arrangement; and

(c) Charge back to the importer where the exporter has failed in discharging his obligations under the sale contract.

(vi) The balances held in the NOSTRO collection account shall be repatriated and credited to the respective exporter’s account with a bank in India immediately on receipt of the confirmation from the importer and, in no case, later than seven days from the date of credit to the NOSTRO collection account.

(vii) AD Category -I banks shall satisfy themselves as to the bonafides of the transactions and ensure that the purpose codes reported to the Reserve Bank in the online payment gateways are appropriate.

(viii) AD Category -I banks shall submit all the relevant information relating to any transaction under this arrangement to the Reserve Bank, as and when advised to do so.

(ix) Each NOSTRO collection account should be subject to reconciliation and audit on a quarterly basis.

Advertisement. Scroll to continue reading.

(x) Resolution of all payment related complaints of exporters in India shall remain the responsibility of the OPGSP concerned.

(xi) OPGSPs who are already providing such services as per the specific holding-on approvals issued by the Reserve Bank shall open a liaison office in India within three months from the date of this circular, after duly finalizing their arrangement with the AD-Category-I banks and obtaining approval from the Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Central Office, Fort, Mumbai 400 001 for this purpose.

In respect of all new arrangements, the OPGSP shall open a liaison office with the approval of the Reserve Bank before operationalising the arrangement.

3. AD Category-I banks desirous of entering into such an arrangement/s should approach the Chief General Manager, Reserve Bank of India, Foreign Exchange Department, Central Office, Fort, Mumbai 400 001, for obtaining one time permission in this regard and thereafter report the details of each such arrangement as and when entered into.

4. AD Category-I banks may bring the contents of this circular to the notice of their constituents concerned.

5. The directions contained in the circular have been issued under Section 10(4) and Section 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any required under any law.

Advertisement. Scroll to continue reading.

Yours faithfully,

( G. Jaganmohan Rao)
Chief General Manager

Written By

Founder @ MediaNama. TED Fellow. Asia21 Fellow @ Asia Society. Co-founder SaveTheInternet.in and Internet Freedom Foundation. Advisory board @ CyberBRICS

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.

Views

News

The US and other countries' retreat from a laissez-faire approach to regulating markets presents India with a rare opportunity.

News

When news that Walmart would soon accept cryptocurrency turned out to be fake, it also became a teachable moment.

News

The DSCI's guidelines are patient-centric and act as a data privacy roadmap for healthcare service providers.

News

In this excerpt from the book, the authors focus on personal data and autocracies. One in particular – Russia.  Autocracies always prioritize information control...

News

By Jai Vipra, Senior Resident Fellow at Vidhi Centre for Legal Policy The use of new technology, including facial recognition technology (FRT) by police...

You May Also Like

Advert

135 job openings in over 60 companies are listed at our free Digital and Mobile Job Board: If you’re looking for a job, or...

News

Rajesh Kumar* doesn’t have many enemies in life. But, Uber, for which he drives a cab everyday, is starting to look like one, he...

News

By Aroon Deep and Aditya Chunduru You’re reading it here first: Twitter has complied with government requests to censor 52 tweets that mostly criticised...

News

Google has released a Google Travel Trends Report which states that branded budget hotel search queries grew 179% year over year (YOY) in India, in...

MediaNama is the premier source of information and analysis on Technology Policy in India. More about MediaNama, and contact information, here.

© 2008-2021 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ

Subscribe to our daily newsletter
Name:*
Your email address:*
*
Please enter all required fields Click to hide
Correct invalid entries Click to hide

© 2008-2021 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ