RBI Circular on Payment Gateways

[The following guest post is contributed by Jitendra Soni, who is an associate at AZB & Partners in Noida.
Views are personal]
The Reserve Bank of
India (“RBI“) has recently issued a fresh circular in an
attempt to facilitate cross-border e-commerce transactions, which can be
accessed
here (“Circular”).
Prior to this Circular, the authorized banks were permitted to offer the
facility to repatriate only export related remittances by entering
into standing arrangements with Online Payment Gateway Service Providers (“OPGSPs”)
in respect of such export of goods and services. This Circular takes a step
ahead by permitting the authorized banks to offer a similar facility for
imports transactions. Some of the key guidelines as laid down in this Circular
are highlighted below for ease of reference:
General
AD Category-I banks
should report the details of each of their arrangements with OPGSPs, as and
when entered into, to the RBI and should take all steps as laid down in the
Circular for operationalizing such arrangement, namely, carrying out due
diligence of the OPGSPs, maintenance of separate export and import collection
accounts in India for each OPGSP, etc.
Foreign entities which
are desirous of operating as OPGSP are required to open a liaison office in
India with the prior approval of the RBI. The Circular also prescribe the
duties of such OPGSPs for operationalizing such arrangement, namely, ensuring
compliance with Information Technology Act, 2000 and all other laws in India,
placing mechanism for resolution of disputes and redressal of complaints, etc.
Indian entities
functioning as intermediaries for electronic payment transactions, which are
desirous of undertaking cross border transactions, are required to maintain
separate accounts for domestic and cross border transactions.
Import Transactions
Only the import of
goods and software (as permitted under the prevalent Foreign Trade Policy)
whose value does not exceed USD 2,000 are eligible to avail this facility.
Immediately upon
receipt of funds from the importer and in no event, later than two (2) days
from the date of credit to the collection account, the sale / import proceeds
in the import collection account is required to be remitted to the respective
overseas exporter’s bank account.
The permitted debits
and credits in and from the OPGSP import collection account are as follows:
           
Permitted Debits
Permitted Credits
Collection from Indian importers for online purchases from
overseas exporters electronically (through credit/debit card, etc.)
Payment to overseas exporters in permitted foreign currency.
Charge back from the overseas exporters
Payment to Indian importers for returns and refunds.
Payment of commission at rates/frequencies as defined under
the contract to the current account of OPSGP.
Bank charges
  
Export Transactions
The framework
governing the export payment transactions remains largely as was prescribed in
the earlier circulars issued by the RBI, namely, Circular No. 109 dated June
11, 2013 (accessible 
here) and Circular No. 17
dated November 16, 2010 (accessible 
here).
Only the exports of
goods and services (as permitted under the prevalent Foreign Trade Policy)
whose value does not exceed USD 10,000 are eligible to avail this facility.
The permitted debits
and credits from the OPGSP export collection account are as follows:
           
Permitted Debits
Permitted Credits
Payment to respective Indian exporters’ accounts.
Repatriation from the NOSTRO collection account,
electronically.
Payment of commission at rates/frequencies as defined under
the contract to the current account of OPSGP.
Charge back to the overseas importer where the Indian exporter
has failed to discharge his obligations under the sale contract.
  
Implications of this
Circular
One of the concerns
which remained unaddressed prior to this Circular was that companies operating
in the ecommerce space were not specifically permitted by the RBI to remit
sales proceeds directly to the bank account of the overseas merchant for import
of goods made by such merchants. This Circular perhaps marks a way forward in
rationalizing the regulatory framework pertaining to processing and remittance
of import related payments to the overseas merchants.
On a practical note
and going forward, in the context of advising online marketplaces in India, which
have overseas merchants listed on their websites, this Circular will form the
basis of advice that such marketplaces can appoint OPGSPs to facilitate the
import related payment to the overseas bank account of such merchants.
 

– Jitendra Soni

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

1 comment

  • We searched up whole internet to get this piece of information. This was very very helpful for us. Could you please let me know your email so that I can contact you for help.

    Thank you!

    -Jagadish

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