The Reserve Bank of India (RBI) will be bringing in regulation for payment gateways and aggregators, it said in its latest Vision Document for Payment and Settlement Systems in India. The RBI highlighted the growing importance of such players with the boom in ecommerce and m-commerce as they facilitate online payments.
The RBI said that ecommerce transactions going through payment gateways are currently monitored through nodal accounts in banks and it felt that it was indirect and address only a few specific aspects of their functioning. “Given their increasing role, the guidelines will be revised for the payments related activities of these entities,” the RBI added.
Beyond this, the RBI has not explained how it would go about regulating payment gateways.Nodal accounts are special purpose escrow accounts created for coordinating online transactions. In India, it is used for holding third party amounts for settlements.
Here are a few more takeaways from the vision document which give an idea on what the RBI will be focusing on:
– Payments for mass transit systems and toll collections: Though there are any digital payment systems for mass transit systems such as metros and buses, the RBI noted that fare collections work on proprietary system and standards. The RBI will now focus on payment mechanisms which are interoperable and built on open standards, preferably using open system payment instruments.
The RBI also wants to migrate cash payments at tolls to electronic methods and will push for a pan-India interoperable environment of toll collection systems.
– Blockchains and distributed ledgers: The RBI said that it would keep track of global developments in block chains and distributed ledger technologies and will put in place a regulatory framework and monitor them as required. To keep itself abreast of new developments in the Fintech space, the RBI will organize an innovation contest through the Institute for Development and Research in Banking Technology (IDRBT). “Learnings from such interfaces will also be used as inputs for policy adaptations,” it added.
– Payments System Advisory Council: The RBI will be setting up a Payments System Advisory Council (PSAC) to formulate new policies and assessing the impact of new technological developments by providing necessary insights about futuristic developments and innovations in the area. The PSAC could have representations from technology, telecommunication, FinTech, security solution providers, academia, Government, etc.
– Assessment of resilience of payment and settlement infrastructures: A framework to test the resilience of (both retail and large value) payment systems in the country would be drafted. To ensure continued operations and availability of the payment systems, resilience of communication / messaging infrastructure would be assessed.
Payment systems being largely driven by changes in technology, a suitable framework to audit and assure the existence of risk control measures and resilience of their IT systems by payment systems operators would be put in place.
What was missing from the document
Though the RBI has shown of interest in blockchains, curiously missing from the document was any mention of Bitcoins and other cryptocurrencies. Earlier in December 2013, the RBI issued a warning that it will not regulate any Virtual Currency including Bitcoin in India and warned people who were dealing with the currency in India of the risks involved, saying that they’re exposing them to financial, legal, operational and security related risk.
However, in August 2015, RBI Governor Raghuram Rajan also mentioned that the apex bank is closely monitoring crypto currencies but has so far not intervened in them. “I would like to say that our philosophy is if it is small then let it develop, let us see how it works and then take a view. That was our attitude towards crypto currencies. It was very very small,” Rajan added.