RBI Asks Cashfree, Razorpay and Stripe To Pause Merchant On-boarding: Report
Moneylife Digital Team 16 December 2022
The Reserve Bank of India (RBI) has ordered Cashfree, Razorpay and Stripe to pause merchant on-boarding until the central bank issues them the payment aggregator (PA) licence it has tentatively approved for them, says a report from Entrackr. Last month, RBI asked Paytm Payments Services (Paytm) Ltd to re-submit the application to operate as a PA and not to on-board new online merchants until approvals remain pending. 
"The central bank told the companies to hand in their security audit report before it licenses them," the report says, adding, "Stripe, the California-headquartered payments firm, has been told to set up an escrow account within India."
Razorpay told Entrackr that "As part of the process for the final authorisation of our PA/PG (payment gateway) license for which we received the in-principle approval from RBI in July, we are now required to share additional details with RBI to aid in the final license process. As part of this process, RBI has suggested us to temporarily withhold onboarding new online merchants till such details are submitted."
According to RBI's guidelines on PAs, a single entity cannot continue to provide an e-commerce marketplace along with payment aggregator services and such payment aggregator services must be separated from the e-commerce marketplace business.
Earlier this week, during an interaction with fin-techs and industry associations, Shaktikanta Das, governor of RBI, asked fin-techs to pay close attention to governance, business conduct, data protection, customer centricity, regulatory compliance, and risk mitigation frameworks. The governor reiterated that RBI will continue to adopt a participative and consultative approach for facilitating innovations in the financial sector.
In the report, Entrackr says, it is unclear why RBI has gone so far as to prohibit on-boarding new merchants, especially when it has reportedly granted in-principle approval for all three entities and it has reached out to the central bank for comment.
Several applications for a PA licence have been rejected by the central bank as RBI prioritises companies whose primary focus is payments, the report says adding, "MobiKwik-owned Zaakpay's application was rejected earlier this year because it had an inadequate net worth, violating RBI's guidelines."
"Firms like Swiggy, Zomato and Google have not been successful in obtaining a PA license, potentially forcing them to rely on licensed payment gateway operators to serve as an intermediary for transactions on their platforms," the report added.
Last month, in a regulatory filing, Paytm had said, "Our 100% subsidiary, Paytm Payments Services Limited (PPSL), is in receipt of a letter from RBI in response to an application from PPSL for the authorisation to provide PA services for online merchants."
One97 Communications (OCL), which owns the Paytm brand, had proposed to transfer the payment aggregator services business undertaken by it to Paytm in December 2020 to comply with the PA guidelines of RBI but the banking regulator rejected its application. (Read: Paytm Payments Bank Asked To Stop Onboarding New Customers; Re-apply for Payment Aggregator Licence)
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