What changed
RBI has mandated prior approval for non-bank PSOs in cases of takeover or acquisition of control, even if management doesn't change, and for sale or transfer of payment activity to an entity not authorised for similar activity. Previously, such requirements were scattered across various guidelines; now they are consolidated and made explicit. Additionally, non-bank PSOs must inform RBI within 15 calendar days of any change in management or directors, or when selling/transferring payment activity to an already authorised entity.
What it means for you
Banks and lenders dealing with non-bank PSOs must ensure that any acquisition or transfer of payment system activities gets RBI's green light beforehand, adding a layer of regulatory compliance. This reduces risk of unapproved changes in control and ensures continuity of oversight. For banks acquiring a non-bank PSO's payment activity, they must apply to RBI and may be held liable for past regulatory actions of the seller.
What you must do
- Review any planned or ongoing acquisitions, takeovers, or transfers involving non-bank PSOs and halt them until RBI approval is obtained.
- Update internal compliance checklists to include prior RBI approval for changes in control or sale of payment activity to unauthorised entities.
- Ensure that any change in management or directors of a non-bank PSO is reported to RBI within 15 calendar days.
- If acquiring a non-bank PSO's payment activity, prepare to apply to RBI and accept liability for past regulatory actions of the seller.
- Publish a public notice for at least 15 days after RBI approval, before effecting any changes.
Who it affects
Non-bank Payment System Operators (PSOs), Banks acquiring or selling payment system activities, Lenders financing acquisitions of non-bank PSOs, Compliance teams at banks and NBFCs dealing with PSOs
What triggers the need for prior RBI approval under this circular?
Prior approval is needed for any takeover or acquisition of control of a non-bank PSO, even if management doesn't change, and for sale or transfer of payment activity to an entity not authorised for similar activity.
What is the timeline for RBI to respond to an application?
RBI will endeavour to respond within 45 calendar days after receiving complete details from both the entities, except for cases involving overseas principals under the Money Transfer Service Scheme.
What happens if a non-bank PSO sells its payment activity to an already authorised entity?
In such cases, prior approval is not needed, but the non-bank PSO must inform RBI within 15 calendar days. The seller must also voluntarily surrender its Certificate of Authorisation.