Big changes are coming to how you pay at stores. The Reserve Bank of India (RBI) is setting new rules for companies that handle point-of-sale (POS) payments. These POS companies let you easily swipe your card or phone at a store instead of using cash. The RBI wants to make sure these companies operate fairly and securely. After releasing guidelines for online payment aggregators like Razorpay and Cashfree, RBI on Tuesday issued draft rules to regulate point-of-sale payment service providers (PA-P). Companies like Innoviti Payments, Pine Labs and MSwipe will be brought under regulatory cover now.
The Reserve Bank of India (RBI) is rolling out fresh regulations for companies handling point-of-sale (POS) transactions, ushering in a new era of transparency and security in the payment terrain.
In a bid to ensure fairness and security in POS operations, the RBI has introduced draft guidelines to regulate point-of-sale payment service providers (PA-P). Companies like Innoviti Payments, Pine Labs, and MSwipe will now come under the regulatory purview, aligning with the RBI’s broader mandate to safeguard consumer interests and promote financial stability.
Major points what you need to know:
Regulatory Compliance: Companies facilitating POS payments must obtain a special permit from the RBI by May 2025 to ensure adherence to specific regulatory standards. Failure to secure authorization will result in the cessation of these services, emphasizing the importance of regulatory compliance in the fintech space.
Minimum Net Worth Requirements: Existing PA-Ps must have a minimum net worth of Rs 15 crore upon applying for RBI authorization, with a mandated increase to Rs 25 crore by March 2028. This stringent requirement underscores the RBI’s commitment to enhancing the financial resilience of market participants.
Enhanced Security Measures: The RBI is prioritizing security enhancements to combat fraud and hacking attempts during POS transactions. Payment aggregators (PAs) are mandated to become members of the Financial Intelligence Unit to report any suspicious transactions, bolstering consumer confidence in the reliability of POS payments.
Level Playing Field: By standardizing regulations across all POS companies, the RBI aims to create a level playing field and foster healthy competition in the payments ecosystem. This move underscores the regulator’s dedication to ensuring equitable access and consumer protection in the digital payments terrain.
Compliance Guidelines: Existing PA-Ps must adhere to new compliance guidelines within three months of the final rules’ announcement, covering areas such as customer complaint management and fraud prevention. These guidelines are designed to enhance operational efficiency and promote trust among consumers.
Net Worth Mandate for New Entrants: New entrants seeking to offer in-store card payments must meet a minimum company value of Rs 15 crore to apply for RBI approval. Within three years of approval, they must increase their company value to Rs 25 crore and maintain it thereafter, demonstrating financial sustainability.
Consequences of Non-Compliance: PA-Ps failing to meet the net worth requirements or failing to apply for approval by the specified deadline risk suspension of in-store card payment services, emphasizing the importance of timely compliance with regulatory norms.
As India embarks on a digital payments revolution, the RBI’s regulatory measures for POS providers mark a significant milestone in ensuring the integrity and resilience of the fintech ecosystem.
India continues its journey towards digital transformation, the role of fintech innovators in driving financial inclusion and economic growth cannot be overstated. The RBI’s regulatory mandate for PoS providers underscores the pivotal role of regulatory oversight in safeguarding the interests of consumers, fostering innovation, and ensuring the integrity of India’s financial system.
Author
CA Swati Panchal
Partner, Panchal S K & Associates
Swati is a partner at Panchal S K & Associates. She possesses an experience in multiple spheres including general functions in the field of Auditing, Accounting and handling Taxation Matters along with the specialized functions including Finance, Banking and other Legal matters. She is well versed in the area of Corporate/Bank Audits, particularly Statutory Audits, Tax Audits, Internal Audits, System Audit, Revenue Audit, company law matters and NBFCs matters.
