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RBI to Permit AD Category-1 Bank to Offer Facility of E-Payments for Imports with OPGSP

Narendra Kumar

| Updated: Sep 05, 2019 | Category: Finance Business, RBI Registration

E-Payments facility for Imports with OPGSP

E-Commerce now-days are extremely important in our daily life and it is the demand of time, customers, business and nations. People are spending daily time more on the internet for work, study, marketing, business, learning, and entertainment. E-commerce has redefined the service segment. It has facilitated the ease of doing business transactions at both the national and international level. E-commerce is the foremost reason for the growth of the Internet. E-commerce sales are expected to grow up to 4 Trillion Dollars by 2020. Therefore, in order to regularize the control over such e-transactions, on 16 November 2010 Reserve Bank of India (RBI) vide its circular issued a set of guidelines to cover such e-commerce arrangements on “Processing and settlement of Exports related receipts facilitated by online Payment Gateways” with OPGSP.

Overview

In the circular, The Reserve Bank of India has decided to permit AD Category-l banks to offer a similar facility of payment for imports by entering into standing arrangements with the OPGSPs. This article at length discusses the new set of consolidated guidelines applicable to both the export and import transactions routed standing arrangement between AD Category-l and OPGSPs.

Note-What is AD Category – I?

Authorized Dealer Category -I Banks are the banks which are authorized by the Reserve Bank to deal in foreign exchange for specified purposes. The conversion of currency notes, coins or travelers’ cheques designated in foreign currency into Indian Rupees and vice versa is possible in AD Category-I and can also to appoint franchisees to undertake the purchase of foreign currency.

Further, before entering into standing arrangements the AD Category-I banks are firstly required to report the details of each such arrangement as and when entered into Foreign Exchange Department, Central Office, Reserve Bank of India, Mumbai. AD Category-I banks shall ensure the following below mentioned points in order to operationalize such arrangements-

  • The due diligence of the OPGSP;
  • To maintain separate Export and Import Collection accounts in India for each OPGSP;
  • Submit all the relevant information to the Reserve Bank, relating to any transaction under such arrangements as and when advised to do so; and
  • On a quarterly basis, ensure reconciliation and audit of the collection accounts.

What are the mandates for operating as OPGSP?

The directions for operating as OPGSP are-

Mandates for Foreign Entities

Foreign entities before entering into an arrangement with the AD Category-I banks will be required to open a liaison office in India with the prior approval of the RBI.

For meeting the criteria following key points are required to be adhere

Ensure adherence to the Information Technology Act, 2000 and all other relevant laws/regulations in force;

The mechanism for resolution of disputes and redressal of complaints;

Create a Reserve Fund appropriate to its return and refund policy and

Appropriate due diligence procedure for onboard sellers, Indian as well as foreign,

To resolve the grievances of all the payment related complaints in India shall remain the responsibility of the OPGSP concerned.

Mandates for Domestic Entities

To undertake cross border transactions all domestic entities functioning as intermediaries for electronic payment transactions are required to maintain separate accounts for domestic and cross border transactions.

Also, Read: Amendment in RBI Act: What is there for NBFCs?.

What are the Salient Features of the Export and Import Transactions?

Standing arrangement between the AD CATEGORY I banks and OPGSP enumerates the salient features of the import and export transactions-

For Import Transactions

  • Facility available

 Import of goods and software

  • Facility amount

Up to USD 2,000

  • Transaction between AD Category-I banks and OPGSP

The AD Category –I bank will obtain a copy of invoice and airway bill from the OPGSP containing the name and address of the beneficiary as evidence of import and report the transaction in R-Return under the foreign currency payment head.

  • Treatment of balances in respective accounts

On receipt of funds from the importer,the balances held in the Import Collection account shall be remitted to the respective overseas exporter’s account immediately and, in no case, later than two days from the date of credit to the collection account.

  • Permitted Debits
    • Payment to overseas exporters in permitted foreign currency;
    • Payment to Indian importers for returns and refunds;
    • Payment of commission at rates/frequencies as defined under the contract to the current account of the OPGSP; and bank charges.
  • Permitted Credits
    • Collection from Indian importers for online purchases from overseas exporters electronically through credit card[1], debit card and net banking.
    • Chargeback from the overseas exporters.

For Export Transactions

  • Facility available

Export of goods and software.

  • Facility amount

Upto USD 10,000

  • Transaction between AD Category-I banks and OPGSP

The AD Category-I banks providing such facilities shall:

NOSTRO collection account -for the receipt of the export-related payments facilitated through such arrangements, open a NOSTRO collection account.

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.

  • Treatment of balances in respective accounts

For the Export transaction, the treatment of balances in respective accounts is that the balances held in the NOSTRO collection account shall be repatriated to the Export Collection account in India, and then credited to the respective exporter’s account with a bank in India immediately on receipt of the confirmation from the importer.

Note – However, in no case, later than seven days from the date of credit to the NOSTRO collection account
  • Permitted Debits
  • Payment to the respective Indian exporters’ accounts;
  • Payment of commission at rates/frequencies as defined under the contract to the current account of the OPGSP;
  • Chargeback to the overseas importer where the Indian exporter has failed in discharging his obligations under the sale contract.
  • Permitted Credits

Repatriation from the NOSTRO[2] collection accounts electronically.

Conclusion

RBI has come up with the conclusion in order to expand the ambit of E-commerce transactions, as-commerce has removed the barrier of geographical place and has allowed the customer and the business person to be in touch directly along with the quick delivery of goods with a very little effort.

Our Recommendation: NBFC Registration Procedure with Reserve Bank of India.

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Narendra Kumar

Experienced Finance and Legal Professional with 12+ Years of Experience in Legal, Finance, Fintech, Blockchain, and Revenue Management.

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