What changed
RBI issued a circular aligning PSO investment rules with earlier NBFC norms on FATF non-compliant jurisdictions. New investors from or through non-compliant FATF jurisdictions are barred from acquiring significant influence (over 20% voting power) in PSOs. Existing investors holding investments before the jurisdiction was classified as non-compliant may continue or bring additional investments as per extant regulations.
What it means for you
PSOs must now screen new investors for FATF compliance and ensure aggregate voting power from non-compliant jurisdictions stays below 20%. This tightens AML/CFT controls in the payment ecosystem, potentially limiting capital inflows from high-risk jurisdictions. Banks and PSOs need to update their KYC and investment monitoring processes accordingly.
What you must do
- Review all existing and prospective investors in your PSO against FATF's high-risk and increased monitoring lists.
- Ensure new investments from FATF non-compliant jurisdictions do not exceed 20% voting power, including potential voting rights.
- Update internal policies and agreements to restrict significant influence from non-compliant jurisdictions.
- Advise existing investors from now non-compliant jurisdictions that they may continue but must comply with additional investment caps.
Who it affects
Payment System Operators (PSOs) authorised by RBI, Entities applying for PSO authorisation under PSS Act, 2007, Investors from FATF non-compliant jurisdictions, Banks and NBFCs with payment system operations
What is considered 'significant influence' under this circular?
Significant influence is defined as holding 20% or more of voting power (including potential voting power from convertible instruments or contingent rights) in a PSO. New investors from FATF non-compliant jurisdictions must stay below this threshold.
Can existing investors from a now non-compliant jurisdiction continue their investment?
Yes, existing investors who held investments before the jurisdiction was classified as FATF non-compliant may continue or even bring additional investments as per extant regulations to support business continuity.
Does this circular apply to entities that have applied for PSO authorisation?
Yes, the instructions apply to any entity that has applied for or intends to apply for authorisation as a PSO under the Payment and Settlement Systems Act, 2007.