In the recent past, significant development has taken place in the domain of cross-border payments. Taking into account these developments, the Reserve Bank of India (‘RBI’), by way of its Circular dated October 31, 2023, has decided to bring all entities and payment aggregators that facilitate cross-border payments for import and export of goods and services, to be treated as Payment Aggregators-Cross Border (‘PA-CBs’), under its regulatory purview. Previously, the aegis of RBI only extended to the domestic payment aggregators. However, the same now applies to PA-CBs as well, subject to the fulfillment of certain conditions. All entities, including Authorised Dealer (‘AD’) banks, domestic payment aggregators and PA-CBs, involved in processing/ settlement of cross-border payment transactions for import and export of goods and services, are required to ensure compliance with these conditions and instructions, as may be modified from time to time. The maximum cap per unit of goods/ services sold/ purchased for import and export transactions processed by PA-CBs will be ₹ 2,500,000 (approx. US$ 30,000).

Primarily, there is a two-fold requirement prescribed under the Circular. Firstly, the requirement for authorization – whilst AD Category-I banks do not require a separate approval from RBI for undertaking PA-CB activity, all non-banks providing PA-CB services, as on October 31, 2023, are required to apply for authorization to the RBI latest by April 30, 2024. Pending authorization from RBI, such entities will be allowed to continue with PA-CB services. However, as a precondition to seeking such authorization, all non-bank PA-CBs must be registered with the Financial Intelligence Unit-India. Additionally, all entities currently carrying out PA-CB services are required to adhere to the guidelines on regulation of payment aggregators and payment gateways (notified by way of a Circular dated March 17, 2020), on an ongoing basis, within three months. The second condition is the minimum net worth criterion for a non-bank PA-CB to continue with cross-border payments services: (i) ₹ 150,000,000 (approx. US$ 1.8 million) at the time of submitting the application to RBI; and (ii) ₹ 250,000,000 (approx. US$ 3 million) by March 31, 2026. If any non-bank PA-CB is unable to conform to these requirements or fails to apply for authorization within the stipulated time period, they will be required to wind up their PA-CB activity by July 31, 2024.

Additionally, there are three categories of PA-CB services that any non-bank entity may apply for the purpose of authorization to the RBI:

i.    Import only PA-CBs (PA-CB-I): Entities engaged in this service are required to maintain an Import Collection Account (‘ICA’) with an AD Category-I scheduled commercial bank. Further, payments for imports must be remitted to an escrow account of the PA, which must subsequently be transferred to the ICA. Any onward transfer(s) to foreign merchants must only be by debit to the ICA. PA-CB-Is must ensure that no payment transactions for import of restricted/ prohibited goods and services, in line with the Foreign Trade Policy, are facilitated;

ii.   Export only PA-CBs (PA-CB-E): Such entities must maintain an Export Collection Account (‘ECA’) denominated in the requisite currency (i.e., INR and/or non-INR) with an AD Category-I scheduled commercial bank. Export proceeds received thereon must be credited to the ECA; and

iii.  Import and Export PA-CBs (PA-CB-E&I): Such entities are required to maintain both ICA and ECA to facilitate the import and export transactions accordingly. All requirements applicable to PA-CB-I and PA-CB-E will apply to such entities.