Regulation of Payment Aggregator
– Cross Border (PA-CB) 2023
Synopsis of the Law
● Date of Execution: The Regulations were officially executed
on October 2023.
● Number of Amendments: As of now, there have been no
amendments to the original guidelines since their execution.
● Sections/Rules/Regulations: The regulation consists of 8 key
sections that outline the regulatory framework for cross-
border payments specifically applicable to FinTech
companies in India.
Overview of the Law
The regulations aim to streamline and regulate cross-border
payment transactions for the import and export of goods and
services. The legislation seeks to address several critical
objectives:
● Enhance Efficiency: Improve the speed and reduce the
costs associated with cross-border transactions. Prior to
the regulation, there were multiple modes of cross-
border payments. Now, all payments come under the
umbrella of PA-CB if any cross-border payment is
facilitated.
Overview of the Law
● Increase Transparency: Establish clear compliance
requirements to ensure transparency in cross-border
payments.
● Promote Financial Inclusion: Facilitate access to financial
services for underserved populations through innovative
FinTech solutions.
History of the Legislation
The development of the Cross Border Payments Guidelines has evolved
significantly since their inception:
1. Initial Discussions (2019): The need for a comprehensive framework
was identified during discussions among G20 finance ministers and
central bank governors, focusing on improving cross-border payment
systems.
2. Roadmap Development (2020): The Financial Stability Board (FSB)
published a roadmap comprising 19 building blocks aimed at tackling
challenges in cross-border payments, such as high costs and low
speed.
3. Implementation Phase (2022): Following extensive consultations with
stakeholders, including FinTech companies, the guidelines were
Regulation 1: Definition of PA-CBs
● This regulation defines Payment Aggregators for Cross-
Border transactions (PA-CBs) as entities that facilitate cross-
border payment transactions for import and export of
permissible goods and services in online mode. It also
clarifies that in the context of Payment Aggregators (PAs),
an 'escrow account' refers to an account where PAs pool or
aggregate the amount collected on behalf of the merchants
they have on-boarded.
Regulation 2: Requirement of Authorization
● Regulation 2 outlines the authorization requirements for PA-
CBs. While AD Category-I banks don't need separate RBI
approval for PA-CB activity, non-banks providing such
services must apply for authorization.
● Entities can seek authorization for one of three categories:
Export only, Import only, or Export and Import PA-CB.
● Any authorized PA wanting to start PA-CB activity (or vice
versa) must seek RBI approval. Non-bank PA-CBs are
required to register with the Financial Intelligence Unit-
India before seeking RBI authorization.
Regulation 3: Network Criterion
● Regulation 3 sets out the minimum networth requirements for
non-bank PA-CBs. Existing non-bank PA-CBs must have a
minimum networth of ₹15 crore when applying for authorization,
increasing to ₹25 crore by March 31, 2026. New non-bank PA-
CBs need ₹15 crore when applying and must reach ₹25 crore by
the end of their third financial year after authorization.
● Non-compliant entities must wind up PA-CB activity by July 31,
2024, and banks must close accounts of non-authorized PA-CBs by
the same date unless they provide evidence of a submitted
application.
Regulation 7: ICA and ECA
● Regulation 7 provides guidelines for Import Collection
Accounts (ICA) and Export Collection Accounts (ECA).
● ICAs and ECAs must be kept separate from escrow accounts
for domestic PA activity. The debits and credits permissible
from escrow accounts of PAs also apply to ICAs and ECAs of
PA-CBs.
