Sunday, September 27, 2015

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

No comments: