Finance Business

RBI Guidelines on “On-tap Authorisation of Payment Systems”

On-tap authorisation

On 15th October 2019, RBI issued guidelines on “ On-tap Authorisation of Payment Systems.”  The main aim behind the introduction of these guidelines is diversification of risk and to encourage innovation and competition. Under this, RBI described minimum net-worth criteria for retail payment systems. Earlier, on 21st January 2019, RBI released a policy paper on the Authorisation of New Retail Payment Systems, stating liberal entry points under this segment for new entrants. As we know, for the creation of a reliable payment ecosystem, non-banks are playing a vital role.

Now, we are going to underline the highlights of the circular;

An offering of On-tap Authorisation

RBI is going to offer on-tap authorisation to the below mentioned:

  1. Bharat Bill Payment Operating Unit (BBPOU)

It is a platform for recurring bill payments. At present, BBPOU covers five segments, such as electricity bill, telecom bill, direct-to-home (DTH), gas, and water bills.

  • Trade Receivables Discounting System (TReDS)

It facilitates the financing of MSME invoices and bills drawn on corporate buyers by way of discounting by financiers. Under this, participants may take benefit from uninterrupted services for discharging functions.

On-tap authorisation payment system - TReDS
TReDS Platform

NBFC – Factors can register themselves as the TReDS mechanism as well as they can register themselves as the financers on the TReDS mechanism. Not only for MSMEs, but it is also an excellent opportunity for NBFCs as they can explore new business segments.

For more details on TReDS, you can read this article: Know Everything about Trade Receivable Discounting System

  1. White Label ATMs (WLAs)

Set-up by the non-banking entities

Net Worth & Eligibility Criteria – On-tap Authorisation of Payment Systems

RBI decided on net worth criteria for entities who wish to function, operate, or provide platforms for the following:

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BBPOUs Payment System

TReDS Payment System
WLAOs Payment System

Note* for your understanding we are describing above mentioned term “Fit and Proper Criteria” below:
  1. The past record of sound credentials and integrity
  2. Director shall have a record of financial integrity; good reputation and character; honesty
  3. Such person shall not have incurred any of the following disqualifications
    1. Convicted by a court for any offense involving moral turpitude or any economic offense or any offense under the laws administered by the RBI;
    2. Declared insolvent and not discharged;
    3. An order, restraining, prohibiting or debarring the person from accessing/dealing in any financial system, passed by any regulatory authority, and the period specified in the order has not elapsed;
    4. Found to be of unsound mind by a court of competent jurisdiction and the finding is in force; and
    5. financially not sound.
  4. RBI’s decision on whether a person is a fit and proper person shall be final.

Authorization Requirements

The authorization will be based on the following factors:

  1. Merits of the Proposal
  2. In respect of additional entities, RBI’s assessment of potential
  3. An application shall be made to

Authorisation requirement

Other Requirements

  • The payment system operators should make sure interoperability among different Retail Payment Systems;
  • For retail payment systems, the KYC requirement shall be as per the KYC master directions issued by the Department of Banking Regulation (DBR), RBI.

The facts, as mentioned above, are based on the press release issued by the RBI on “On-tap Authorisation of Payment Systems” dated 15th October 2019.


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