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The International Financial Services Centres Authority issues Consultation Paper on revised Payment Services Regulations

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The International Financial Services Centres Authority has issued a revised draft of the Payment Services Regulations for 2023, taking into account the public comments received on the initial draft released on June 13, 2023.

Payment Systems essentially are specialized infrastructures used for interbank money transfers. Further, under the Payment and Settlement Systems Act of 2007, International Financial Services Centres Authority is granted the authority to license and oversee โ€œpayment systemsโ€.

The revised regulations inter alia introduce a comprehensive definition clause, providing a clear outline of the services categorized as โ€œpayment servicesโ€. These services include account issuance service (including e-money account issuance service), e-money issuance service, escrow service, cross-border money transfer service, and merchant acquisition service.

The draft regulations, also define persons and entities which are exempted from the registration requirement. This includes entities such as an IFSC Banking Company or an IFSC Banking Unit that hold licenses or permissions under the Banking Regulation Act, 1949, and persons licensed to engage in the business of issuing credit cards or charge cards within the IFSC, or any other persons prescribed by the Authority.

The draft regulations establish criteria that the International Financial Services Centres Authority will use to assess the applications received, which includes evaluating the financial soundness of the applicant, their adequate experience, necessary infrastructure, net worth, and fit and proper criteria, and more.

Similarly, the Reserve Bank of India (RBI) also governs Payment Aggregators (PAs) and Payment Gateways (PGs). These intermediaries play a crucial role in facilitating online payments. PAs are entities that enable e-commerce sites and merchants to accept various payment instruments from customers for completion of their payment obligations without the need for merchants to create a separate payment integration system. PAs help merchants connect with acquirers, receiving payments from customers, pool and transfer them to merchants after a specified period. PGs, on the other hand, provide the technological infrastructure for routing and facilitating the processing of online payment transactions but do not handle funds directly.

A copy of the International Financial Services Centres Authority consultation paper is enclosed below.

Readers are welcome to send their views to Regstreet Law Advisors at info@regstreetlaw.com.

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