What changed
RBI formalized directions for opening and operation of accounts and settlement of payments involving intermediaries in electronic payment transactions. Banks must now ensure that intermediaries do not delay fund transfers to merchants by maintaining internal accounts. Intermediaries facilitating immediate delivery of services (e.g., travel or movie tickets) are excluded from the definition of 'intermediaries' under these directions.
What it means for you
Banks must ensure that intermediaries do not delay fund transfers to merchants by converting existing accounts to internal accounts and restricting permitted credits/debits. Lenders need to monitor intermediary accounts closely and ensure compliance with these directions to avoid regulatory action. This strengthens the payment ecosystem by enforcing accountability on banks regarding aggregators and gateways.
What you must do
- Review existing intermediary account agreements to ensure conversion to internal accounts within three months of issuance (by February 24, 2010).
- Implement controls to ensure only permitted credits/debits (payments, refunds, commissions at predetermined rates) in these accounts.
- Update internal policies to verify that intermediaries facilitating immediate delivery (e.g., travel or movie tickets) do not fall within the definition of 'intermediaries' when opening accounts.
- Train staff on the definition of intermediaries under the PSS Act, 2007 and the requirement that accounts are internal accounts of the bank, not operated by intermediaries.
Who it affects
All banks, Payment system providers and system participants, Intermediaries like aggregators and payment gateway service providers, E-commerce and m-commerce service providers
What is the key requirement for intermediaries under this circular?
Banks must ensure that customer payments for goods/services are remitted to merchants without undue delay by maintaining internal accounts for collection of payments, which are not operated by intermediaries.
Are all intermediaries covered by these directions?
No, intermediaries facilitating immediate delivery of services (e.g., travel or movie tickets) are excluded from the definition of 'intermediaries' as they are akin to Delivery versus Payment arrangements, but banks must verify this.
What law empowers RBI to issue these directions?
These directions are issued under Section 18 of the Payment and Settlement Systems Act, 2007.