Tag Archives: RBI

penalty on Axis Bank


The Reserve Bank of India (RBI) has imposed, by an order dated September 01, 2021, a monetary penalty of ₹25 lakh (Rupees Twenty five lakh only) on Axis Bank Limited (the bank) for contravention of/non-compliance with certain provisions of directions issued by RBI contained in the Reserve Bank of India – (Know Your Customer (KYC)) Direction, 2016. The penalty has been imposed in exercise of powers vested in RBI under provisions of section 47A(1)(c) read with section 46(4)(i) of the Banking Regulation Act, 1949 (the Act).

This action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.


A scrutiny was carried out by RBI during February 2020 and March 2020 in a customer account maintained with the bank and it was observed that the bank had failed to comply with the aforesaid directions issued by RBI, ie., the bank failed to monitor/carry out on-going due diligence in the said account to ensure that the transactions were consistent with its knowledge about the customer, customer’s business and risk profile. In furtherance to the same, a notice was issued to the bank advising it to show cause why penalty should not be imposed on it for contravention of the said directions, as stated therein.

After considering the bank’s reply to the notice and oral submissions made during the personal hearing, RBI came to the conclusion that the charge of contravention of/non-compliance with the aforesaid RBI directions were substantiated and warranted imposition of monetary penalty, to the extent of non-compliance with the aforesaid direction.

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penalty on Bombay Mercantile


The Reserve Bank of India (RBI) has, by an order dated September 02, 2021, imposed a monetary penalty of ₹50 lakh (Rupees fifty lakh only) on Bombay Mercantile Co-operative Bank Ltd., Mumbai (the bank) for non-compliance with directions issued by RBI contained in in the Reserve Bank of India (Co-operative Banks – Interest Rate on Deposits) Directions, 2016 and specific directions dated March 05, 2018 and April 11, 2018 issued by RBI under the Supervisory Action Framework (SAF). This penalty has been imposed in exercise of powers vested in RBI under the provisions of Section 47 A (1) (c) read with Section 46 (4) (i) and Section 56 of the Banking Regulation Act, 1949, taking into account failure of the bank to adhere to the aforesaid directions issued by RBI.

This action is based on deficiency in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.


The statutory inspection of the bank conducted by the RBI with reference to the bank’s financial position as on March 31, 2019, the Inspection Report pertaining thereto, and examination of all related correspondence revealed, inter alia, that the bank had offered Interest rates on NRE deposits higher than those offered by it on comparable domestic rupee term deposits and had sanctioned unsecured advances, resulting in non-compliance with aforesaid directions issued by RBI. In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for contravention of the directions issued by RBI.

After considering the bank’s reply to the notice and oral submissions made in the personal hearing, RBI came to the conclusion that the aforesaid charge of non-compliance with RBI directions was substantiated and warranted imposition of monetary penalty.

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incentives to enhance distribution of coins

Review of incentive and other measures to enhance distribution of coins

Please refer to our Master Direction DCM (CC) No.G-2/03.41.01/2021-22 dated April 01, 2021 on “Currency Distribution & Exchange Scheme (CDES)” for bank branches including currency chests which inter alia, provides for financial incentives of ₹25 per bag to banks for distribution of coins over the counter.

2. Keeping in view the overall objectives of Clean Note policy and to ensure that all bank branches provide better customer service to members of public with regard to exchange of notes and distribution of coins, the afore-said Scheme has since been reviewed and it has now been decided to revise the incentive being paid to the banks for distribution of coins with a major thrust on alternate avenues so as to extend the outreach. Accordingly, paragraph 2 (Incentives) Sl.No. (iii) stands revised as follows:

a) Revised scheme of incentive for distribution of coins

(i) With effect from September 01, 2021, an incentive of ₹65/- per bag for distribution of coins (instead of ₹25/- as earlier) will be paid on the basis of net withdrawal from currency chest (CCs), without waiting for claims from banks. Currency chest branch will have to pass on the incentive to the linked bank/branches for coins distributed by them on a pro-rata basis within one week from the receipt of incentives from RBI.

(ii) An additional incentive of ₹10/- per bag would be paid for coin distribution in rural and semi-urban areas on the submission of a CA / Auditor certificate to this effect.

(iii) The distribution of coins shall also be verified by RBI Regional Offices during inspection of currency chest/incognito visit to branches etc.

b) Banks to provide coins to bulk customers

Further, in terms of Paragraph 2, Sl. No. (iii) (iii) of circular ibid, banks were instructed to put in place a system of checks and balances so as to ensure that coins are distributed to retail customers in small lots and not to bulk customers.

On a review, with a view to meet the coin requirements of bulk customers (requirement of more than 1 bag in a single transaction) banks are advised to provide coins to such customers purely for business transactions. The banks may also endeavour to provide such services as part of their Board approved policy on ‘Door Step Banking’ services. Such customers should be KYC compliant constituents of the bank and the record of coins supplied should be maintained. Banks are advised to exercise due diligence to ensure that such facility is not misused.

Disbursement of coins to retail customers through counters of bank branches shall continue as hitherto.

c) Engaging Business Correspondents (BCs) for distribution of coins

Attention is invited to circulars DBOD.No.BAPD.BC.46/22.01.009/2013-14 dated September 2, 2013 and DCM (Plg) No. G 12 /10.65.03/2013-14 dated September 10, 2013, permitting banks to include distribution of coins and banknotes in the scope of activities undertaken by BCs and explore the possibility of enlisting their service for carrying out various currency management functions while addressing the last mile connectivity issues.

In this context, it is reiterated that banks should enhance the engagement of their BCs for distribution of coins to public and may also incentivise such activities as per their Board approved policy.

To ensure steady supply of coins to bulk customers and BCs for onward distribution, all banks may ensure that each of their branches maintains a minimum stock of one bag of coins in each denomination.

d) Engaging Cash in Transit (CIT) entities for distribution of coins

Attention is also invited to circular DCM (Plg) No. G – 14/10.65.03/2013-14 dated October 10, 2013 on Monetary Policy Statement for 2013-14 – Distribution of Banknotes and Coins – Alternative Avenues wherein banks were advised to explore the possibility of engaging the services of CIT entities for the purpose of distribution of banknotes and coins. It is reiterated that banks may engage CIT entities to further enhance distribution of coins to public.

3. Implementation of coin distribution measures may be commented upon by officers deputed to undertake bi-monthly and half-yearly verification as a part of internal control and supervision by the currency chest maintaining bank.

4. Senior Officers of banks on visits to currency chests and branches may be advised to specifically comment on the implementation of the above measures in their visit reports.

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tokenisation – enhancements

We invite reference to our circular DPSS.CO.PD No.1463/02.14.003/2018-19 dated January 8, 2019 on “Tokenisation – Card transactions”, permitting authorised card networks to offer card tokenisation services subject to the conditions listed therein. Initially limited to mobile phones and tablets, this facility was subsequently extended to laptops, desktops, wearables (wrist watches, bands, etc.), Internet of Things (IoT) devices, etc., vide our circular CO.DPSS.POLC.No.S-469/02-14-003/2021-22 dated August 25, 2021 on “Tokenisation – Card Transactions : Extending the Scope of Permitted Devices”.

2. Reference is also invited to our circulars DPSS.CO.PD.No.1810/02.14.008/2019-20 dated March 17, 2020 (as updated from time to time) and CO.DPSS.POLC.No.S33/02-14-008/2020-2021 dated March 31, 2021 on “Guidelines on Regulation of Payment Aggregators and Payment Gateways”, advising that neither the authorised Payment Aggregators (PAs) nor the merchants on-boarded by them shall store customer card credentials [also known as Card-on-File (CoF)].

3. On a review of the tokenisation framework and to enable cardholders to benefit from the security of tokenised card transactions as also the convenience of CoF, it has been decided to effect the following enhancements –

  1. Extend the device-based tokenisation1 framework referred to at paragraph 1 above to CoF Tokenisation (CoFT) as well.
  2. Permit card issuers to offer card tokenisation services as Token Service Providers2 (TSPs).
  3. The facility of tokenisation shall be offered by the TSPs only for the cards issued by / affiliated to them.
  4. The ability to tokenise3 and de-tokenise card data shall be with the same TSP.
  5. Tokenisation of card data shall be done with explicit customer consent requiring Additional Factor of Authentication (AFA) validation by card issuer.
  6. Additional requirements relating to CoFT are listed in the Annex.

4. Further, in the interest of cIarity, the following points may be noted –

  1. With effect from January 1, 2022, no entity in the card transaction / payment chain, other than the card issuers and / or card networks, shall store the actual card data. Any such data stored previously shall be purged.
  2. For transaction tracking and / or reconciliation purposes, entities can store limited data – last four digits of actual card number and card issuer’s name – in compliance with the applicable standards.
  3. Complete and ongoing compliance with the above by all entities involved, shall be the responsibility of the card networks.

5. This directive is issued under Section 10 (2) read with Section 18 of Payment and Settlement Systems Act, 2007 (Act 51 of 2007).


(CO.DPSS.POLC.No.S-516/02-14-003/2021-22 dated September 07, 2021)

Conditions to be fulfilled for offering CoFT services

1. For the purpose of CoFT, the token shall be unique for a combination of card, token requestor and merchant4.

2. If card payment for a purchase transaction at a merchant is being performed along with the registration for CoFT, then AFA validation may be combined.

3. The merchant shall give an option to the cardholder to de-register the token. Further, a token requestor having direct relationship with the cardholder shall list the merchants in respect of whom the CoFT has been opted through it by the cardholder; and provide an option to de-register any such token.

4. A facility shall also be given by the card issuer to the cardholder to view the list of merchants in respect of whom the CoFT has been opted by her / him, and to de-register any such token. This facility shall be provided through one or more of the following channels – mobile application, internet banking, Interactive Voice Response (IVR) or at branches / offices.

5. Whenever a card is renewed or replaced, the card issuer shall seek explicit consent of the cardholder for linking it with the merchants with whom (s)he had earlier registered the card.

6. The TSP shall put in place a mechanism to ensure that the transaction request has originated from the merchant and the token requestor with whom the token is associated.

7. All other provisions of the RBI circulars dated January 8, 2019 and August 25, 2021 shall be applicable.

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penalty on Dhanalakshmi Bank

RBI has levied a penalty of Rs.2.75 million on The Dhanalakshmi Bank Limited for contravention of section 26A(2) of the Banking Regulation Act, 1949 – which mandates banks to transfer to the Depositor Education and Awareness Fund any amount which has not been operated upon for 10 years or more or any deposit which is unclaimed for more than 10 years.


The Reserve Bank of India (RBI) has imposed, by an order dated August 23, 2021, a monetary penalty of ₹27.50 lakh (Rupees Twenty Seven Lakh and Fifty Thousand only) on Dhanlaxmi Bank Ltd., Thrissur, Kerala (the bank) for contravention of sub-section (2) of section 26A of the Banking Regulation Act, 1949 (the Act) read with paragraph 3 of The Depositor Education and Awareness Fund Scheme, 2014 (the scheme) enclosed with RBI Circular on ‘The Depositor Education and Awareness Fund Scheme, 2014 – Section 26A of Banking Regulation Act, 1949- Operational Guidelines’ dated May 27, 2014. The penalty has been imposed in exercise of powers vested in RBI under the provisions of section 47 A (1) (c) read with section 46 (4) (i) of the Act.

This action is based on the deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.


The Statutory Inspection for Supervisory Evaluation (ISE) of the bank was conducted by RBI with reference to its financial position as on March 31, 2020, and the examination of the Risk Assessment Report and Inspection Report pertaining to the same, revealed, inter-alia, contravention of above-mentioned provisions of the Act read with the scheme. In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed on it for contravention of the provisions of the Act read with the scheme, as stated therein.

After considering the bank’s reply to the notice and oral submissions made during the personal hearing, RBI came to the conclusion that the charge of contravention of aforesaid provisions of the Act read with the scheme was substantiated and warranted imposition of monetary penalty on the bank.

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penalty on Greater Bombay Bank

RBI imposed monetary penalty on The Greater Bombay Co-operative Bank Limited of Rs.2.5 million as per their press release issued yesterday.


The Reserve Bank of India (RBI) has, by an order dated August 12, 2021, imposed a monetary penalty of ₹25 lakh (Rupees twenty five lakh only) on The Greater Bombay Co-operative Bank Ltd., Mumbai, Maharashtra (the bank) for non-compliance with directions issued by RBI on ‘Frauds in UCBs: Changes in monitoring and reporting mechanism. This penalty has been imposed in exercise of powers vested in RBI under section 47 A (1) (c) read with sections 46 (4) (i) and 56 of the Banking Regulation Act, 1949.

This action is based on deficiencies in regulatory compliance and is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.


The statutory inspection of the bank conducted by the RBI with reference to the bank’s financial position as on March 31, 2019, the Inspection Report (IR) pertaining thereto, and examination of all related correspondence revealed, inter alia, non-compliance with aforesaid directions issued by RBI. In furtherance to the same, a notice was issued to the bank advising it to show cause as to why penalty should not be imposed for contravention of the directions issued by RBI. After considering the bank’s reply to the notice, oral submissions made in the personal hearing, RBI came to the conclusion that the aforesaid charges were substantiated and warranted imposition of monetary penalty.

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penalty for cash outs in ATMs

RBI has decided to levy a penalty of Rs.10,000/- on any banks in case there is cash out in their ATMs for more than 10 hours in a month.

Scheme of Penalty for non-replenishment of ATMs

Objective of the Scheme

The Scheme of Penalty for non-replenishment of ATMs has been formulated to ensure that sufficient cash is available to public through ATMs.

Effective Date

The Scheme shall be effective from October 01, 2021. Therefore, banks/ WLAOs should put in place a robust system for monitoring the availability of cash in ATMs and ensure timely replenishment to avoid cash-outs.

Condition for counting instances of cash-outs in an ATM

When the customer is not able to withdraw cash due to non-availability of cash in a particular ATM.


Banks shall submit system generated statement on downtime of ATMs due to non- replenishment of cash to the Issue Department of RBI under whose jurisdiction these ATMs are located. In case of WLAOs, the banks which are meeting their cash requirement shall furnish a separate statement on behalf of WLAOs on cash-out of such ATMs due to non-replenishment of cash. Such statements shall be submitted for every month within five days of the following month i.e., first such statement for the month of October 2021 shall be submitted on or before November 05, 2021 to the Issue Department concerned.

Quantum of Penalty

Cash-out at any ATM of more than ten hours in a month will attract a flat penalty of ₹ 10,000/- per ATM. In case of White Label ATMs (WLAs), the penalty would be charged to the bank which is meeting the cash requirement of that particular WLA. The bank, may, at its discretion, recover the penalty from the WLA operator.

Administration of the Scheme

The Scheme of Penalty will be administered by Issue Departments of the Regional Offices of the Bank. The Competent Authority to impose penalty will be the Officer-in-Charge of the Issue Department of the Regional Office under whose jurisdiction the ATMs are located. Appeal against the decision of the Competent Authority, if required, may be made by the banks/ WLAOs to the Regional Director/Officer-in-Charge of the Regional Office concerned, within one month from the date of imposition of penalty. As the intention of the Scheme is to ensure replenishment of ATMs in time, appeals would be considered only in cases of genuine reasons beyond the control of bank/ WLAOs such as, imposition of lockdown by the State/ Administrative authorities, strike, etc.

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collateral free loans

RBI circular dated 9th August, 2021 enhancing the collateral free loans to Self Help Groups (SHGs) from Rs.10 lakhs to Rs.20 lakhs.

7.4 Security and Margin:

7.4.1 For loans to SHGs up to ₹10.00 lakh, no collateral and no margin will be charged. No lien should be marked against savings bank account of SHGs and no deposits should be insisted upon while sanctioning loans.

7.4.2 For loans to SHGs above ₹10 lakh and up to ₹20 lakh, no collateral should be charged and no lien should be marked against savings bank account of SHGs. However, the entire loan (irrespective of the loan outstanding, even if it subsequently goes below ₹10 lakh) would be eligible for coverage under Credit Guarantee Fund for Micro Units (CGFMU).”

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resolution framework

RBI circular dated 6th August, 2021 wherein they have given more time upto 1st October, 2022 for stressed borrowers to meet their key parameters for being considered as a normal borrowing unit, rather than a stressed borrowing unit. This is done in view of the resurgence of the covid-19 cases in the country.

Resolution Framework for COVID-19-related Stress – Financial Parameters – Revised timelines for compliance

Please refer to the circular DOR.No.BP.BC/13/21.04.048/2020-21 dated September 7, 2020 inter alia advising the key ratios and their sector specific thresholds to be considered by lending institutions while finalising the resolution plans in respect of eligible borrowers under Part B of the Annex to the Resolution Framework for Covid-19 related stress issued on August 6, 2020.

2. The key ratios consisted of four operational ratios, viz., Total Debt / EBITDA, Current Ratio, Debt Service Coverage Ratio (DSCR) and Average Debt Service Coverage Ratio (ADSCR), along with the ratio Total Outside Liabilities / Adjusted Tangible Net Worth (TOL/ATNW) representing the debt-equity mix of the borrower post implementation of the resolution plan.

3. In view of the resurgence of the Covid-19 pandemic in 2021 and recognising the difficulties it may pose for the borrowers in meeting the operational parameters, it has been decided to defer the target date for meeting the specified thresholds in respect of the four operational parameters, viz. Total Debt / EBIDTA, Current Ratio, DSCR and ADSCR, to October 1, 2022.

4. The target date for achieving the ratio TOL/ATNW, as crystallised in terms of the resolution plan, shall remain unchanged as March 31, 2022.

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export credit in FC

RBI circular dated 6th August, 2021 allowing banks to use any other alternative reference rate in respect of export credit in foreign currency, in view of the discontinuance of the LIBOR system.

Please refer to Master Circular DBR.No.DIR.BC.14/04.02.002/2015-16 dated July 1, 2015 on Rupee / Foreign Currency Export Credit and Customer Service to Exporters.

2. As per the extant guidelines, authorized dealers are permitted to extend Pre-shipment Credit in Foreign Currency (PCFC) to exporters for financing the purchase, processing, manufacturing or packing of goods prior to shipment at LIBOR/EURO LIBOR/EURIBOR related rates of interest.

3. In view of the impending discontinuance of LIBOR as a benchmark rate, it has been decided to permit banks to extend export credit using any other widely accepted Alternative Reference Rate in the currency concerned. All other instructions in this regard shall remain unchanged.

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buying/ selling of old banknotes/ coins

RBI press release dated 4th August, 2021 cautioning public against falling for fictitious offers for buying/ selling of old banknotes/ coins from unscrupulous elements in the society.

It has come to the notice of Reserve Bank of India that certain elements are fraudulently using the name/ logo of Reserve Bank of India, and seeking charges/ commission/ tax from public, in transactions related to buying and selling of old banknotes and coins through various online/ offline platforms.

It is clarified that Reserve Bank of India does not deal in such matters and never seeks charges/ commissions of any sort. Reserve Bank of India has also not authorised any institution/ firm/ person etc. to collect charges/ commission on its behalf in such transactions.

Reserve Bank of India advises members of public to remain cautious and not to fall prey to elements using the name of Reserve Bank of India to extract money through such fictitious/ fraudulent offers.


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opening of current a/c by banks

RBI circular dated 4th August, 2021 micro managing the current account regime by the banks is being extended for compliance to 31st October, 2021. Actually it is the most confusing circular ever issued by the RBI. There is no need for this kind of controlling of the banks working by the RBI as most of the edits have stated in the recent past.

Please refer to circulars DOR.No.BP.BC/7/21.04.048/2020-21 dated August 6, 2020DOR.No.BP.BC.27/21.04.048/2020-21 dated November 2, 2020 and DOR.No.BP.BC.30/21.04.048/2020-21 dated December 14, 2020 on Opening of Current Accounts by Banks – Need for Discipline.

2. The instructions were issued vide the above circulars in order to enforce credit discipline amongst the borrowers as well as to facilitate better monitoring by the lenders; and for this purpose, a graded approach had been prescribed on opening and operating of current accounts and CC/OD facilities. Banks were required to implement these instructions in a non-disruptive manner while keeping the bonafide business requirements of the borrowers in mind.

3. It is reiterated that:

  1. In case of borrowers who have not availed of CC/OD facility from any bank, there is no restriction on opening of current accounts by any bank if exposure of the banking system to such borrowers is less than ₹5 crore.
  2. In case of borrowers who have not availed of CC/OD facility from any bank and the exposure of the banking system is ₹5 crore or more but less than ₹50 crore, there is no restriction on lending banks to such borrowers from opening a current account. Even non-lending banks can open current accounts for such borrowers though only for collection purposes.
  3. The restriction applies to borrowers in case they avail of CC/OD facility since all operations that can be carried out from a current account can also be carried out from a CC/OD account as banks in a CBS environment follow a one-bank-one-customer model as against a one-branch-one-customer model.

4. We have in the meantime received requests from the banks for some more time to resolve the operational issues while implementing the circular in letter and spirit. Therefore, in order to ensure that the instructions are implemented in a non-disruptive manner, it has been decided that:

  1. Banks will be permitted time till October 31, 2021 to implement the provisions of the circular. This extended time line shall be utilised by banks to engage with their borrowers to arrive at mutually satisfactory resolutions within the ambit of the circular. Such issues which banks are unable to resolve themselves shall be escalated to Indian Banks’ Association (IBA) for appropriate guidance. Residual issues, if any, requiring regulatory consideration shall be flagged by IBA to the Reserve Bank for examination by September 30, 2021.
  2. In terms of para 1(vii) of circular DOR.No.BP.BC.30/21.04.048/2020-21 dated December 14, 2020, accounts of White Label ATM operators and their agents are exempt from the provisions of the Current Account circular dated August 6, 2020. Since Cash-in-Transit (CIT) Companies/ Cash Replenishment Agencies (CRAs) essentially carry out a similar activity, the exemption would be applicable to these entities as well.
  3. Banks shall put in place a monitoring mechanism, both at head office and regional/zonal office levels to monitor non-disruptive implementation of the circular and to ensure that customers are not put to undue inconvenience during the implementation process.
  4. As has already been indicated in FAQ no 6 of circular DOR.No.BP.BC.30/21.04.048/2020-21 dated December 14, 2020, banks are not permitted to open current accounts for borrowers who have availed agricultural/ personal Overdraft (OD) or OD against deposits.

5. Banks shall ensure that the contents of the circular are implemented in letter and spirit without causing undue inconvenience to their borrowers. All other instructions contained in the circulars ibid remain unchanged.

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outsourcing of payment & settlement related activities

RBI circular dated 3rd August, 2021 wherein they have laid down conditions for outsourcing of payment & settlement related activities by payment system operators. Here’s the gist.

1. Introduction

1.1. This framework is applicable to non-bank PSOs insofar as it relates to their payment and / or settlement-related activities.

1.2. It seeks to put in place minimum standards to manage risks in outsourcing of payment and / or settlement-related activities (including other incidental activities like on-boarding customers2, IT based services, etc.).

1.3. The framework is not applicable to activities other than those related to payment and / or settlement services, such as internal administration, housekeeping or similar functions.

1.4. For the purpose of this framework, ‘outsourcing’ is defined as use of a third party (i.e. service provider) to perform activities on a continuing basis that would normally be undertaken by the PSO itself, now or in the future. ‘Continuing basis’ would include agreements for a limited period.

1.5. The term ‘service provider’ includes, but is not limited to, vendors, payment gateways, agents, consultants and / or their representatives that are engaged in the activity of payment and / or settlement systems. It also includes sub-contractors (i.e., secondary service providers) to whom the primary service providers may further outsource whole or part of some activity related to payment and settlement system activities outsourced by the PSO.

1.6. This framework is applicable to a service provider, whether located in India or elsewhere.

1.7. The service provider, unless it is a group company of the PSO, shall not be owned or controlled by any director or officer of the PSO or their relatives; the terms – control, director, officer and relative – have the same meaning as assigned to them under the Companies Act, 2013.

1.8. Outsourcing process is associated with several risks; following is an illustrative list of such risks:

  1. Compliance Risk – Where privacy, customer / consumer and prudential laws are not adequately complied with by the service provider;
  2. Concentration and Systemic Risk – Where the overall industry has considerable exposure to one service provider and hence, individual PSO may lack control over the service provider;
  3. Contractual Risk – Where the PSO may not have the ability to enforce the contract;
  4. Country Risk – When political, social or legal climate creates added risk;
  5. Cyber Security risk – Where breach in IT systems may lead to potential loss of data, information, reputation, money, etc.;
  6. Exit Strategy Risk – When over-reliant on one firm, the PSO loses related skills internally, and it becomes difficult to bring the activity back in-house; and where the PSO has entered into contracts that makes speedy exit prohibitively expensive;
  7. Legal Risk – Where the PSO is subjected to fines, penalties, or punitive damages resulting from supervisory actions, as well as to private settlements due to acts of omission and commission by the service provider;
  8. Operational Risk – Arising due to technology failure, fraud, error, inadequate financial capacity to fulfil obligations and / or to provide remedies;
  9. Reputation Risk – Where the service provided is poor and customer interaction is inconsistent with the overall standard expected from the PSO; and
  10. Strategic Risk – Where the service provider conducts business on its own behalf, inconsistent with the overall strategic goals of the PSO.

1.9. It is essential that the PSO, which is outsourcing its activities, ensures the following:

  1. Exercises due diligence, puts in place sound and responsive risk management practices for effective oversight, and manages the risks arising from such outsourcing of activities.
  2. Outsourcing arrangements do not impede its effective supervision by RBI.

1.10. Outsourcing of activities by the PSOs shall not require prior approval from RBI.

2. Activities that shall not be outsourced

2.1. The PSOs shall not outsource core management functions3, including risk management and internal audit; compliance and decision-making functions such as determining compliance with KYC norms. However, while internal audit function itself is a management process, the auditors for this purpose can be appointed by the PSO from its own employees or from the outside on contract.

3. Criticality of outsourcing

3.1. The PSO shall carefully evaluate the need for outsourcing its critical processes and activities, as also selection of service provider(s) based on comprehensive risk assessment. The critical processes are those, which if disrupted, shall have the potential to significantly impact the business operations, reputation, profitability and / or customer service.

4. PSO’s role and regulatory and supervisory requirements

4.1. Outsourcing of any activity by the PSO shall not reduce its obligations, and those of its board and senior management, who are ultimately responsible for the outsourced activity. The PSO shall, therefore, be liable for the actions of its service providers and shall retain ultimate control over the outsourced activity.

4.2. The PSO, while exercising due diligence in respect of outsourcing, shall consider all relevant laws, regulations, guidelines and conditions of authorisation / approval, licensing or registration.

4.3. Outsourcing arrangements shall not affect the rights of a customer of a payment system against the PSO, as well as those of a payment system participant against the PSO, including her / his ability to avail grievance redressal as applicable under the relevant laws. Responsibility of addressing the grievances of its customers shall rest with the PSO, including in respect of the services provided by the outsourced agency (i.e., service provider).

4.4. A PSO, which has outsourced its customer grievance redressal function, must also provide its customers the option of direct access to its nodal officials for raising and / or escalating complaints. Such access should be enabled through adequate phone numbers, e-mail ids, postal address, etc., details of which shall be displayed prominently on its website, mobile applications, advertisements, etc., and adequate awareness shall also be created about the availability of this recourse.

4.5. If the customer is required to have an interface with the service provider to avail products of the PSO, then the PSO shall state the same through the product literature / brochure, etc., and also indicate therein the role of such service provider.

4.6. A PSO must ensure that outsourcing does not impede or interfere with the ability of the PSO to effectively oversee and manage its activities; nor does it prevent RBI from carrying out its supervisory functions and objectives.

5. Outsourcing policy

5.1. To outsource any of its payment and settlement-related activities, the PSO shall have a board-approved comprehensive outsourcing policy, which incorporates, inter-alia, criteria for selection of such activities and service providers; parameters for grading the criticality of outsourcing; delegation of authority depending on risks and criticality; and, systems to monitor and review the operation of these activities.

6. Role of the board and responsibilities of the senior management

6.1. Role of the board

The board of the PSO, or a committee of the board to which powers have been delegated, shall be responsible, inter-alia, for the following:

  1. approving a framework to evaluate the risks and criticality of all existing and prospective outsourcing;
  2. approving policies that apply to outsourcing arrangements;
  3. mapping appropriate approval authorities for outsourcing depending on risks and criticality;
  4. setting up suitable administrative mechanism of senior management for the purpose of this framework;
  5. undertaking periodic review of outsourcing policy, strategies and arrangements for their continued relevance, safety and soundness;
  6. deciding on business activities to be outsourced and approving such arrangements; and
  7. complying with regulatory instructions.

6.2. Responsibilities of the senior management

The senior management shall be responsible for:

  1. evaluating the risks and criticality of all existing and prospective outsourcing, based on the framework approved by the board;
  2. developing and implementing sound and prudent outsourcing policies and procedures commensurate with the nature, scope and complexity of the outsourcing activity;
  3. reviewing periodically the effectiveness of policies and procedures, and for identifying new outsourcing risks as they arise;
  4. communicating, in a timely manner, to the board any information related to outsourcing risks;
  5. ensuring that contingency plans, based on realistic and probable disruptive scenarios, are in place and tested periodically; and
  6. ensuring an independent review and audit for compliance with the set policies.

6.3. A central record of all outsourcing arrangements shall be maintained and it shall be readily accessible for review by the board and senior management of the PSO. The record shall be updated promptly, and half yearly reviews shall be placed before the board or its senior management.

7. Evaluating capability of the service provider

7.1. While considering / renewing an outsourcing arrangement, the PSO shall include issues related to undue concentration of such arrangements with a service provider.

8. Outsourcing agreement

8.1. The terms and conditions governing the contract between the PSO and the service provider shall be carefully defined in written agreements and vetted by PSO’s legal counsel for their legal effect and enforceability. Every such agreement shall address the risks and the strategies for mitigating them. The agreement shall be sufficiently flexible to allow the PSO to retain adequate control over the outsourced activity and the right to intervene with appropriate measures to meet legal and regulatory obligations. The agreement shall also bring out the nature of legal relationship between the parties, i.e. whether agent, principal or otherwise. Some of the key provisions of the agreement should incorporate the following:

  1. defining activity to be outsourced, including appropriate service and performance standards;
  2. having access by the PSO to all books, records and information relevant to the outsourced activity, available with the service provider;
  3. providing for continuous monitoring and assessment by the PSO of the service provider, so that any necessary corrective measure can be taken immediately;
  4. including termination clause and minimum period to execute such provision, if deemed necessary;
  5. ensuring controls are in place for maintaining confidentiality of customer data and incorporating service provider’s liability in case of breach of security and leakage of such information related to customers;
  6. incorporating contingency plan(s) to ensure business continuity;
  7. requiring prior approval / consent of the PSO for use of sub-contractors by the service provider for all or part of an outsourced activity;
  8. retaining PSO’s right to conduct audit of the service provider, whether by its internal or external auditors, or by agents appointed to act on its behalf, and to obtain copies of any audit or review reports and findings made about the service provider in conjunction with the services performed for the PSO;
  9. adding clauses to allow RBI or person(s) authorised by it to access the PSO’s documents, record of transactions and other necessary information given to, stored or processed by the service provider, within a reasonable time;
  10. keeping clauses to recognise the right of RBI to cause an inspection to be made of a service provider of a PSO and the books of accounts, by one or more of its officers or employees or other persons;
  11. requiring clauses relating to a clear obligation on any service provider to comply with directions given by RBI insofar as they involve activities of the PSO;
  12. maintaining confidentiality of customer’s information even after the agreement expires or gets terminated; and
  13. preserving documents and data by the service provider in accordance with legal / regulatory obligations of the PSO, and the PSO’s interests in this regard shall be protected even after termination of the services.

9. Confidentiality and security

9.1. Public confidence and customer trust in the PSO is a prerequisite for its stability and reputation. PSO shall ensure the security and confidentiality of customer information in the custody or possession of the service provider.

9.2. Access to customer information by staff of the service provider shall be on ‘need to know’ basis, i.e., limited to areas where the information is required to perform the outsourced function.

9.3. The service provider shall be able to isolate and clearly identify the PSO’s customer information, documents, records and assets to protect their confidentiality. Where the service provider acts as an outsourcing agent for multiple PSOs, there should be strong safeguards (including encryption of customer data) to avoid co-mingling of information, documents, records and assets of different PSOs.

9.4. The PSO shall regularly review and monitor the security practices and control processes of the service provider and require the service provider to disclose security breaches.

9.5. The PSO shall immediately notify RBI about any breach of security and leakage of confidential information related to customers. In such eventualities, the PSO would be liable to its customers for any damage.

9.6. The PSO shall ensure that the extant instructions related to storage of payment system data shall be strictly adhered to by service provider, domestic or off-shore.

10. Responsibilities of Direct Sales Agents (DSAs) / Direct Marketing Agents (DMAs)

10.1. The PSOs shall ensure that the DSAs / DMAs are properly trained to handle their responsibilities with care and sensitivity, particularly for aspects such as soliciting customers, hours of calling, privacy of customer information, conveying the correct terms and conditions of the products on offer, etc.

10.2. The PSOs shall put in place a board-approved code of conduct for DSAs / DMAs and obtain their undertaking to abide by the same.

11. Business continuity and management of disaster recovery plan

11.1. Service provider shall develop and establish a robust framework for documenting, maintaining and testing business continuity and recovery procedures arising out of any outsourced activity. The PSO shall ensure that the service provider periodically tests the business continuity and recovery plans, and shall also consider conducting occasional joint exercises for testing of business continuity and recovery procedures with its service provider.

11.2. To mitigate risk of unexpected termination of the outsourcing agreement or liquidation of the service provider, the PSO shall retain adequate control over its outsourcing and shall have the right to intervene with appropriate measures to continue its business operations and its services to the customers in such cases without incurring prohibitive expenses or any break in its operations and services to the customers.

11.3. As part of contingency plan, the PSO shall consider the availability of alternative service provider(s), as well as the possibility of bringing the outsourced activity back in-house in an emergency and assess the cost, time and resources that would be involved.

11.4. The PSO’s information, documents and records, and other assets shall be isolable by the service provider. This is to ensure that in appropriate situations, all documents, record of transactions and information given to the service provider, and assets of the PSO, can be removed from the possession of the service provider in order to continue its business operations, or deleted, destroyed or rendered unusable.

12. Monitoring and control of outsourced activities

12.1. The PSO shall put in place a management structure to monitor and control its outsourcing activities. It shall ensure that outsourcing agreement with the service provider contains provisions to address monitoring and control by it of the outsourced activities.

12.2. Regular audit by either the internal or external auditors of the PSO shall be conducted to assess the adequacy of the risk management practices adopted in overseeing and managing the outsourcing arrangements and the PSO’s compliance with its risk management framework.

12.3. The PSO shall, at least on an annual basis, review the financial and operational conditions of the service provider to assess its ability to fulfil its outsourcing obligations. Such due diligence reviews shall highlight any deterioration or breach in performance standards, confidentiality and security, and in business continuity preparedness.

12.4. In the event of termination of the outsourcing agreement for any reason in cases where the service provider deals with the customers, the same shall be given due publicity by the PSO informing the customers so as to ensure that they stop dealing with the concerned service provider.

12.5. Certain cases like outsourcing of cash management, may involve reconciliation of transactions between the PSO, the service provider and its sub-contractors, if any. In such cases, PSO shall ensure that this reconciliation process is carried out in a timely manner.

12.6. A robust system of internal audit of all outsourced activities shall be put in place and monitored by the board of the PSO.

13. Outsourcing within a group / conglomerate

13.1. The PSO could have back office and service arrangements / agreements with group entities; for instance, sharing of premises, legal and other professional services, hardware and software applications, centralised back office functions, outsourcing certain payment and settlement services to other group entities, etc. Such arrangements with group entities shall be based on the PSO’s board-approved policy and service level arrangements / agreements with its group entities. The agreements shall cover demarcation of shared resources like premises, personnel, etc. Wherever there are multiple group entities involved or any cross-selling is observed, the customers shall be informed about the actual company / entity offering the product / service.

13.2. The PSO shall ensure that such arrangements:

  1. are appropriately documented in written agreements with details like scope of services, charges for services and maintaining confidentiality of customer’s data;
  2. do not cause any confusion among customers as to whose products / services they are availing, by clear physical demarcation of the site of activities of different group entities;
  3. do not compromise ability of the PSO to identify and manage risks on a standalone basis; and
  4. do not prevent RBI from being able to obtain information required for supervision of the PSO or pertaining to the group as a whole.

13.3. The PSO shall ensure that its ability to carry out operations in a sound fashion is not affected if premises or other services (such as IT systems and support staff) provided by the group entities become unavailable.

13.4. If sharing of premises is done with the group entities for cross-selling, the PSO shall take measures to ensure that the entity’s identification is distinctly visible and clear to the customers. Any communication by group entities (marketing brochure, verbal communication by staff / agent, etc.) in the PSO’s premises shall mention nature of arrangement of the entities with the PSO, so that customers are clear about the seller of the product.

13.5. The PSO’s advertisement or any agreement shall not give any overt or tacit impression that it is in any way responsible for the obligations of its group entities.

13.6. The risk management practices to be adopted by the PSO while outsourcing to a related party (i.e. party within the group / conglomerate) shall be identical to those specified above in this framework for a non-related party.

14. Additional requirements for off-shore outsourcing

14.1. The engagement of a service provider in a foreign country exposes the PSO to country risk. To manage such country risk, the PSO shall closely monitor government policies and, political, social, economic and legal conditions in countries where the service provider is based, both during the risk assessment process and on a continuous basis, and establish sound procedures for dealing with country risk problems. This includes having appropriate contingency and exit strategies. In principle, arrangements shall only be entered into with parties operating in jurisdictions generally upholding confidentiality clauses and agreements. The governing law of the arrangement shall also be clearly specified.

14.2. The activities outsourced outside India shall be conducted in a manner so as not to hinder efforts to supervise or reconstruct the India activities of the PSO in a timely manner.

14.3. As regards off-shore outsourcing of its services relating to Indian operations, the PSO shall ensure the following:

  1. The off-shore regulator regulating the off-shore service provider shall neither obstruct the arrangement nor object to RBI’s visit(s) for audit / scrutiny / examination / inspection / assessment or visit(s) by PSO’s internal and external auditors;
  2. The regulatory authority of the off-shore location does not have access to the data relating to Indian operations of the PSO simply on the ground that the processing is being undertaken there (not applicable if off-shore processing is done in the home country of the PSO); and
  3. The jurisdiction of the courts in the off-shore location where data is processed, does not extend to the operations of the PSO in India on the strength of the fact that the data is being processed there even though the actual transactions are undertaken in India.

15. Members / Participants of payment systems operated by the PSOs

15.1. In some payment systems operated by the PSOs, there could be other members / participants also. Some of these entities such as token requestors in tokenisation services rendered by card networks, third party application providers in Unified Payments Interface (UPI), etc., may not be directly regulated or supervised by RBI. Many of these entities may provide payment services directly to customers as well. It is prudent for such entities to put in place a system to manage risks arising out of activities outsourced by them.

15.2. As a best practice, the PSOs may engage with all participants in a payment transaction chain to encourage them to implement this framework in letter and spirit.

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access for non-banks to CPS

RBI guidelines dated 28th July, 2021 whereby they are extending the Centralised Processing System facility to few non bank entities like PPI Issuers, Card Networks, and White Label ATM operators. Read on.

1 Background

1.1 Centralised Payment Systems (CPS) in India are Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) systems, both owned and operated by Reserve Bank. As part of its drive to encourage moving towards digital payments, Reserve Bank has been continuously taking measures to improve the payment ecosystem in general, and CPS in particular. The NEFT and RTGS systems were made available 24x7x365 with effect from December 2019 and December 2020 respectively.

1.2 One of the ways to provide impetus to digital payments is to extend the access to payment systems to more entities. This is also engaging the attention of other central banks globally. Reserve Bank’s Vision Document on Payment and Settlement Systems 2019-2021 includes review of membership of CPS to enable access neutrality between banks and non-banks and to develop a framework for settlement risk management with increased participation of non-banks. The document also refers to the need for a single national settlement account for all authorised card networks.

1.3 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.

1.4 Banks have been providing the services to non-banks for their payment and settlement needs. However, if the bank, which provides payment services to non-banks, is impacted, it can cause business disruption to the non-banks also. The disruption, even if temporary, could have the potential to cause and spread instability in the system. Consequently, the customers of the non-banks, who are using their products and services, would also get affected.

2 Direct Access for Non-banks to CPS

2.1 Meaning of Direct Access to CPS

2.1.1 Allotment of a separate Indian Financial System Code (IFSC).

2.1.2 Opening a Current Account with the Reserve Bank in its core banking system (e-Kuber).

2.1.3 Maintaining a settlement account with the Reserve Bank.

2.1.4 Membership of Indian Financial Network (INFINET) and use of Structured Financial Messaging System (SFMS) to communicate with CPS.

2.2 Benefits of Direct Access

2.2.1 Efficiency: For non-banks, the cost of routing payments through banks can be minimised. The risk of failure or delay in execution of fund transfers can be eliminated if the transactions are directly initiated by non-banks.

2.2.2 Competition and innovation: Non-banks increasingly and actively offer financial services which hitherto were the sole domain of banks. They are seen to be agile in coming up with innovative products and solutions as well. Direct access to CPS can further enable them to leverage technology to offer customised choices to consumers. They can use their capabilities to assimilate and analyse data to support their innovations and solutions. As non-banks compete in the same segment that banks operate, direct access can provide level playing field, minimising the need to use intermediaries.

2.2.3 Risk management and stability: As the settlement is carried out in central bank money, it greatly reduces the uncertainty in finality of the payments and settlement risk. Expanding the access and participation facilitates diversity and resiliency of the ecosystem.

2.2.4 Data protection: Direct access to CPS can enable the non-banks to safeguard customer information and fund flows, which may not be possible when using banks to provide payment services.

3 Eligibility

3.1 Entities

3.1.1 Non-banks include entities like Payment System Providers (PSPs) and Non-Banking Financial Companies (NBFCs) that are regulated by Reserve Bank as also entities that are under the remit of other financial sector regulators like PFRDA, IRDAI, SEBI, etc.

3.1.2 To start with, access to non-banks in CPS will be enabled in a phased manner. In the first phase, only the following authorised non-bank PSPs shall be provided access –

  1. Prepaid Payment Instrument (PPI) Issuers;
  2. Card Networks; and
  3. White Label ATM Operators.

3.2 Criteria

3.2.1 Eligibility for non-bank access to CPS shall be as per the criteria prescribed by Reserve Bank.

3.2.2 For access to CPS the non-bank PSPs shall fulfil the following criteria:

  1. Valid Certificate of Authorisation (CoA) from Reserve Bank under the Payment and Settlement Systems Act, 2007 (PSS Act).
  2. Net-worth of ₹25 crore or as prescribed as per CoA, whichever is higher.
  3. 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.
  4. Implementation of centralised processing systems.
  5. Adequate technical / system readiness including cyber resilience.
  6. Compliance with local payment data storage requirements issued by Reserve Bank from time to time.
  7. 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.
  8. Satisfactory record of compliance to conditions laid out in CoA and regulatory guidelines.
  9. Recommendations of the concerned regulatory / supervisory department of Reserve Bank.

3.2.3 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.

3.2.4. 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.

3.2.5 Non-bank PSPs shall not be eligible for availing Intra-Day Liquidity (IDL) facility from the Reserve Bank. For any shortfall / default in completing the payment / settlement obligations, such entities shall approach their bankers for a ready line of credit facility. They shall ensure that appropriate liquidity support arrangements are in place with their bankers to avoid gridlocks and to ensure business continuity.

3.2.6 Non-bank entities shall not be permitted to sponsor sub-members.

3.2.7 Non-bank entities 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.

3.3 Membership Type and Nature of Transactions

3.3.1 Nature of transactions that can be executed shall depend upon the type of membership approved for RTGS. Based on requirement, some categories of PSPs shall be permitted to participate in NEFT also.

3.3.2 The details of access for non-bank PSPs to CPS shall be as under:

Sl. No.PSPRTGS Membership Type and Nature of TransactionsNEFT
1.PPI IssuersDCustomers, own / other bank / non-bank account transfersYes
2.Card NetworksCMultilateral net settlement batches, own account transfersNo
3.WLA OperatorsDCustomer, own / other bank account transfersNo

3.3.2 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:

  1. PPI issuers to merchants / payment aggregators;
  2. WLA operators to agencies handling ATMs; and
  3. Full-KYC PPI customers to load the PPIs from their bank account.

ii. RTGS inter-bank transfers initiated by:

  1. Non-bank PSPs to maintain sufficient balance in their escrow account with member bank/s based on net debit or credit position; and
  2. WLA operators and PPI issuers to other member banks / non-banks.

iii. Multilateral Net Settlement Batches (MNSB) posted in RTGS by:

  1. Card networks for settlements, dispute management, annual fee collections, etc.;
  2. Direct credit to WLA operators in NFS settlements; and
  3. 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.

4 Operational Aspects

4.1 Process of Applying for Direct Access to CPS by Non-banks

4.1.1 The detailed process of applying for membership is given in the Master Directions on Access Criteria for Payment Systems issued vide DPSS.CO.OD.No.1846/04.04.009/2016-17 dated January 17, 2017.

4.1.2 All applications for membership to CPS shall be submitted to the Chief General Manager, Department of Payment and Settlement Systems (DPSS), Reserve Bank of India (RBI), Central Office (CO), 14th Floor, Central Office Building, Shahid Bhagat Singh Marg, Fort, Mumbai – 400 001.

4.1.3 The application shall be submitted in the format prescribed in Appendix – 1 “Covering letter for membership to Centralised Payment System”, of Master Directions on Access Criteria for Payment Systems, together with annexures.

4.1.4 Reserve Bank shall endeavour to complete the process of scrutinising the applications, that are complete with all required documents, within 60 days of receipt.

4.1.5 On approval of the application, DPSS, CO shall issue a letter of approval to the non-bank entity with a validity of six months, within which the entity shall ensure participation in CPS. DPSS, CO shall forward the application to RBI, Mumbai Regional Office (MRO), for further processing of RTGS and NEFT membership.

4.1.6 DPSS, MRO shall act as the point of contact for guidance of the non-bank entity.

4.1.7 Non-bank entities shall choose the type of access to the RTGS system, i.e., SFMS member interface, Web service interface or Payment originator module through INFINET, as per their convenience and requirement in consultation with Indian Financial Technology & Allied Services (IFTAS) and Reserve Bank.

4.1.8 Non-bank entities shall approach RBI, MRO for going live in RTGS, NEFT, getting INFINET membership, getting SFMS membership, opening of Current Account (in e-Kuber), opening of Settlement Account in RTGS, for necessary technical support from IFTAS for INFINET connectivity and SFMS integration, etc.

4.1.9 RBI, MRO shall refer the entity to RBI, Primary Data Centre (PDC), Department of Information Technology (DIT), CO for establishing connectivity to RTGS, user acceptance testing, providing sign-off for going live in RTGS, NEFT, etc.

4.2 Other Operational Aspects

4.2.1 RTGS Settlement Account shall be funded from Current Account at start of the day for an approved amount and balance, if any, in RTGS Settlement Account at end of the day, shall be transferred back to the Current Account.

4.2.2 Non-bank entities shall transfer funds from their Current Account to RTGS Settlement Account and vice versa during the operating hours. Non-bank entities shall monitor both their accounts continuously throughout the day. Any disruption in settlements due to insufficient balance in their accounts shall be viewed seriously and attract stringent regulatory / supervisory action, including levy of penalty, suspension / termination of CPS membership, etc.

4.2.3 Non-bank PPI issuers shall transfer funds from their escrow account/s with scheduled commercial bank/s to Current Account with RBI and from Current Account with RBI to the escrow account/s for operational purposes. The balances in Current Account with the Reserve Bank shall not be reckoned for the purpose of maintenance of daily balance in escrow accounts.

4.2.4 For any issue that arises during the course of membership of the non-bank entities, the decision of Reserve Bank shall be final and binding.

4.2.5 Reserve Bank shall review the access type and membership criteria of non-bank entities for further streamlining as and where necessary.

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FLA return date extended

RBI vide a notice on its FLA return site, has extended the last date for filing of FLA returns for the year ended 31st March, 2021 to 31st July, 2021. It has also sent mails to the stake holders on this matter, which is very sweet of them.

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