RBI Notification

RBI extends access to Centralized Payment System to non-banks in phases

RBI extends access to Centralized Payment System to non-banks in phases

The Reserve Bank of India vide notification dated 28th July 2021 allowed authorised non-banks payment system providers, including prepaid payment issuers, card networks and white label ATM operators, to participate in centralized payment system such as RTGS and NEFT in phases. RBI issued operational guidelines for the same. Let’s discuss this in detail.

Background: Centralized Payment System to Non-banks

Central payment system in India includes Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) which are owned and operated by the Reserve Bank. With a view to encourage moving towards digital payments, the RBI has been taking measures to improve the payment ecosystem and CPS in particular.

Hence one of the manners to improve digital payments is to provide the access to the payment system to more entities. By providing access to payment system to more entities, the RBI is looking to provide impetus to digital payments.

RBI’s notification on access for Non-banks to Centralized Payment System

According to the RBI notification in this regard, non-banks include entities such as PSPs and NBFCs that are regulated by the RBI as also entities under the remit of other financial sector regulators such as PFRDA, IRDAI, SEBI.

Presently there are very few non-banks that have been given approval, apart from banks, to participate in CPS so far. On the other hand, banks have been extending the services to non-banks for their payment and settlement needs.

Further, the RBI said in its notification that direct access for non-banks to CPS will lower the overall risk in the payments ecosystem. It said that the move will lower the cost of routing systems through banks while reducing the risk of failure or delay in implementation of fund transfers would be eliminated if the transactions are initiated by non-banks directly.

What would be the impact of direct access?

Direct access to RBI authorized payment operators to extend RTGS and NEFT would mean the following:

  • They can allot a separate Indian Financial System Code[1];
  • Open a current account with RBI in its core banking system;
  • Maintain a settlement account with the RBI;
  • Become members of Indian Financial Network and use structured financial messaging system for communication with CPS.

Also read:RBI revises Regulatory Restrictions on Loans and Advances

Eligibility Criteria

For access to centralized payment system, non-banks PSPs would have to fulfil the following eligibility criteria:

  • Possess a valid authorization certificate by the Reserve Bank;
  • Have a net worth of 25 crore rupees or as specified by the RBI’s certificate of authorization, whichever is higher;
  • Incorporated under the Companies Act in India (It is worth mentioning here that if entities don’t meet this eligibility requirement, they would require having their Indian subsidiary or associate to enter into valid agreements with the RBI);
  • Implement Central Processing Systems;
  • Have adequate technical or system readiness, including cyber resilience;
  • Compliance with local payment data storage requirements issued by the RBI;
  • Adherence to RBI’s master directions on Access criteria  for payment systems, RTGS system, NEFT procedural guidelines;
  • Have a satisfactory compliance record to conditions provided in Companies Act and regulatory guidelines;
  • Have recommendations of the concerned regulatory/supervisory department of the RBI.

The RBI said that it will have the final authority to suspend/terminate membership of a PSP if it is found not complying with the access criteria on an ongoing basis.

Nature of transactions to be executed shall be based on the type of membership approved for RTGS, whereas some category of PSPs would be allowed to participate in NEFT as well.

RTGS/NEFT customer payments could be initiated by PPI issuers to merchants/payment aggregators- WLA operators to agencies handling ATMs- Full KYC PPI customers to load PPIs from their account.

RTGS inter-banks transfers can be started by non-bank PSPs with a view to have enough balance in their escrow account with member bank/s depending upon the net debit or credit position and WLA operators and PPI issuers to other member banks or non-banks.


Non-Bank PSPs may approach their bankers for ready line of credit facility in case of a shortfall or default in fulfilling their settlement obligations, but won’t get access to the RBI’s intraday liquidity facility. As per RBI, Centralized Payment System access will help in reducing the payments costs for non-banks and also lower their dependency on banks. For accurate information, you may check out the RBI notification attached to this article.


Ashish M. Shaji

Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on corporate law. He is a creative thinker and has a great interest in exploring legal subjects.

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