The International Financial Services Centres Authority (IFSCA) plays a crucial role in governing financial products and services in the International Financial Service Centres (IFSC). As part of their regulatory efforts, IFSCA has released a draft of the IFSCA (Payment Services) Regulations, 2023, seeking public input. Full text of the sane us as follows:-
INTERNATIONAL FINANCIAL SERVICES CENTRES AUTHORITY
Consultation paper on draft IFSCA (Payment Services) Regulations, 2023
Objective:
1. The objective of this consultation paper is to seek comments/views/suggestions from the public on the proposed International Financial Services Authority (Payment Services) Regulations, 2023 (“the regulations”).
Background:
1. The International Financial Services Centres Authority (IFSCA) is the unified regulator for the development and regulation of financial products, financial services and financial institutions in the International Financial Service Centres (IFSC). Section 3(1)(d)(xi) of the IFSCA Act, 2019 (“the act”) lists “providing payment services” as a financial service under the act.
2. IFSCA had issued the draft IFSCA (Payment Services) Regulations, 2023 on June 13, 2023 for seeking public comments. Based on the public comments received, the draft regulations have been substantially redrafted. Therefore, it has been decided to issue the updated draft for public comments.
3. The updated regulations inter alia provide for:
(i) Clear specification of activities included under the definition of “payment services” and those that are excluded from the definition of “payment services”
(a) The regulations clearly specify the services that are included within the definition of payment services and those that are excluded from the definition.
(b) The regulations also specify the entities providing one or more payment service/s which are exempted from the requirement of authorisation.
(ii) Authorisation and associated requirements
Applicants will be able to provide all eligible payment services on the basis of a single authorisation. Applicants will be required to set up a Company with registered office in IFSC and satisfy the net worth requirement specified in the regulations before applying for an authorisation under these regulations.
(iii) Authorisation criteria
Criteria that shall be used by the Authority to evaluate the applications received by the Authority has been laid down in the regulations.
(iv) Revocation and surrender of authorisation
Procedure for revocation of authorisation by the Authority and surrender of authorisation by the payment service provider has been clearly spelt out
(v) Governance arrangements
Governance arrangements for the payment service providers including management of service relationships have been clearly laid down.
4. The draft regulations are placed on the website of the IFSCA at https://ifsca.gov.in/PublicConsultation. General public and stakeholders are requested to forward their comments/suggestions through e-mail to Mr. Supriyo Bhattacharjee at [email protected] and Mr. Vaibhav Sattavan at [email protected] on or before November 10, 2023 in the attached format. The comments may be provided in MS Word or MS Excel format only.
Format for providing comments / suggestions
IFSCA (Payment Services) Regulations, 2023
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DRAFT
International Financial Services Centres Authority (Payment Services) Regulations, 2023
In exercise of the powers conferred by sub-section (1) of Section 12 read with sub-section 1 of section 28 of the International Financial Services Centres Authority Act, 2019 (50 of 2019), the International Financial Services Centres Authority hereby makes the following regulations namely: –
Chapter I
Preliminary
Short title and commencement
1. (1) These regulations may be called the International Financial Services Centres Authority (Payment Services) Regulations, 2023.
(2) They shall come into force on the date of their publication in the Official Gazette. Definitions
2. (1) In these regulations, unless the context otherwise requires, the terms defined herein shall bear the meanings as assigned to them below, and their cognate expressions shall be construed accordingly –
(a) “account issuance service” means any of the following services:
i. the service of issuing a payment account to a payment service user;
ii. any service relating to any operation required for operating a payment account, including:
a) any service (other than a cross-border money transfer service) that enables money to be placed in a payment account; or
b) any service (other than a cross-border money transfer service) that enables money to be withdrawn from a payment account;
(b) “act” means the International Financial Services Centres Authority Act, 2019 (50 of 2019);
(c) “agent” means any person that carries on a business of acting as an authorised agent for another person, for the purposes of negotiating or concluding the sale or purchase of goods or services on behalf of that other person;
(d) “applicable funds” means-
i. funds received by the Payment Service Provider from, or for the benefit of, a payment service user for the execution of a payment transaction;
ii. sums received from a Payment Service Provider for the execution of a payment transaction on behalf of a payment service user.
(e) “authority” means the International Financial Services Centres Authority established under sub-section (1) of Section 4 of the Act;
(f) “branch” means a place of business, other than the head office;
(g) “certificate of authorisation” means the certificate containing the details of the authorisation granted by the Authority to a Payment Service Provider under regulation 11;
(h) “company” means a company as defined in sub-section 20 of section 2 of the Companies Act, 2013 (18 of 2013);
(i) “control” means control as defined in sub-section 27 of section 2 of the Companies Act, 2013 (18 of 2013)
(j) “cross-border money transfer service” means either of the following services:
i. any service of accepting money from a person in IFSC, whether as principal or agent, for the purpose of transmitting, or arranging for the transmission of, the money to any person outside IFSC;
ii. any service of receiving any money from a person outside IFSC for, or arranging for the receipt of any money from a person outside IFSC by, any person in IFSC, whether as principal or as agent;
(k) “digital payment token” means any digital representation of value (other than an excluded digital representation of value prescribed by the Authority) that —
i. is expressed as a unit;
ii. is not denominated in any currency, and is not pegged by its issuer to any currency;
iii. is, or is intended to be, a medium of exchange accepted by the public, or a section of the public, as payment for goods or services or for the discharge of a debt;
iv. can be transferred, stored or traded electronically; and
v. satisfies such other characteristics as the Authority may prescribe;
(l) “e-money” means any electronically stored monetary value that —
i. is denominated in any specified foreign currency;
ii. has been paid for in advance to enable the making of payment transactions through the use of a payment account;
iii. is accepted by a person other than its issuer; and
iv. represents a claim on its issuer
but does not include any deposit accepted in or outside IFSC, from any person in or outside IFSC, and does not include a digital payment token (DPT);
(m) “e-money issuance service” means the service of issuing e-money to a Payment Service User for the purpose of allowing a Payment Service User to make payment transactions;
(n) “escrow service” means the service provided by a Payment Service Provider under an agreement, whereby an asset or money is held by such Payment Service Provider in an escrow account on behalf of two parties that are in the process of completing a transaction.
(o) “holding company”, means a company as defined in sub-section 46 of section 2 of the Companies Act, 2013 (18 of 2013);
(p) “International Financial Services Centre” shall have the meaning assigned to it in clause (g) of sub-section (1) of section 3 of the Act;
(q) “key managerial personnel” shall have the meaning assigned to it in subsection 50 of section 2 of the Companies Act, 2013 (as amended) and any other person whom the Payment Service Provider may declare as a key managerial personnel;
(r) “merchant acquisition service” means any service of accepting and processing a payment transaction for a merchant under a contract between the Payment Service Provider and the merchant, which results in a transfer of money to the merchant pursuant to the payment transaction, regardless of whether the Payment Service Provider comes into possession of any money in respect of the payment transaction;
(s) “nth-party service provider” means a service provider that is part of a Service Provider’s supply chain and supports the ultimate delivery of services to one or more Payment Service Providers;
(t) “payment account” means an account held with a Payment Service Provider in the name of one or more Payment Service Users which is used for the execution of payment transactions;
(u) “payment instrument” means any Personalised device or set of procedures through which a Payment Services User initiates a payment order;
(v) “payment order” means any instruction by a Payment Service User to the Payment Service Provider requesting the execution of a payment transaction;
(w) “payment services” means any of the activities or services that is specified in Part A of Schedule 1 of these regulations when carried out as a regular business activity but does not include activities/services specified in Part B of Schedule I of these regulations;
(x) “payment service provider” means any person that provides one or more of the Payment Services listed in Part A of Schedule 1 as a regular business activity and who has been duly authorised by the Authority as a Regular Payment Service Provider or a Significant Payment Service Provider to provide such Payment Services;
(y) “payment service user” means any person, in IFSC or outside IFSC, that makes use of a Payment Service provided by a Payment Service Provider in the capacity of a payer or a payee, or of both;
(z) “payment system” shall have the meaning assigned to it in clause (i) of sub-section (1) of section 2 of Payment and Settlement Systems Act, 2007 (51 of 2007) (as amended).
(aa) “payment transaction” means an act initiated by the payer or payee, or on behalf of the payer, of placing, transferring or withdrawing funds, with or without any underlying obligations between the payer and payee;
(ab) “principal executive” means an employee designated by a Payment Service Provider who is responsible for the overall activities of the Payment Service Provider in the IFSC;
(ac) “regular payment service provider” means any Payment Service Provider, authorised under regulation 11 of these regulations, other than “significant payment service provider”
(ad) “safeguarding institution” means an IFSC Banking Unit (IBU) or an IFSC Banking Company (IBC) as defined in clause (ec) and (eb), respectively, of sub-regulation (1) of regulation 2 of the International Financial Services Centres Act (Banking) Regulations, 2020;
(ae) “service provider” means any person that provides services to one or more Payment Service Provider either directly or indirectly (e.g., as part of the supply chain of another service provider);
(af) “significant payment service provider” means any Payment Service Provider, who is authorised under regulation 11 of these regulations and satisfies the conditions mentioned in Part C of Schedule I of these regulations;
(ag) “specified foreign currency” means the currencies specified in the First Schedule of the International Financial Services Centres Authority (Banking) Regulations, 2020;
(ah) “subsidiary” means a company as defined in sub-section 87of section 2 of the Companies Act, 2013 (18 of 2013);
(ai) “service relationship” means a formal arrangement for the provision of one or more services, or parts thereof, in the form of activities, functions, processes and tasks, to a Payment Service Provider by a service provider including:
a) arrangements for the provision of services to a Payment Service Provider by an intra-group service provider;
b) services supporting transactions between a Payment Service Provider with their employees, customers or counterparties (e.g., compliance or back-office functions).
(2) Words and expressions used and not defined in these regulations but defined in the Act or Acts mentioned in the First Schedule to the Act, or the Companies Act, 2013, or any rules or regulations made thereunder shall have the same meanings respectively assigned to them in those Acts, rules or regulations or any statutory modification or re-enactment thereto, as the case may be.
Chapter II
Authorisation to Payment Service Providers
Requirement of authorisation for commencing or carrying on a Payment Service
3. Any person seeking to provide Payment Services in or from International Financial Services Centre (‘IFSC’) shall require authorisation from the Authority under these regulations.
Application for authorisation for providing Payment Services
4. (1) Any person desirous of providing Payment Services in or from an International Financial Services Centre (hereinafter referred to as ‘Applicant’) shall submit an application to the Authority, for grant of authorisation as a Payment Service Provider in the format specified in Schedule II of these regulations;
Provided that the persons specified in Schedule V of these regulations are exempted from the requirement of obtaining authorisation under these regulations.
(2) The application under sub-regulation (1) shall be accompanied by a non-refundable application fee as may be specified by the Authority and paid in such manner as may be specified by the Authority.
(3) A person authorised as a Payment Service Provider may provide one or more of Payment Services as specified in Part A of the Schedule I to these regulations.
(4) Notwithstanding sub-regulation (3), a person must have in force an authorisation for SPSP if in addition to satisfying the condition of sub-regulation (3), he satisfies one or more conditions in Part C of Schedule I to these regulations.
Activities that are not Payment Services
5. Activities listed in Part B of Schedule I shall not be considered as Payment Services for the purpose of these regulations.
Legal form of the applicant
6. An applicant for authorisation under regulation 4 shall be required to be incorporated as a company with its registered office in IFSC before submitting the application to the Authority under these regulations.
Net worth requirement
7. (1) A Payment Service Provider shall comply with the net worth requirements, as specified in Schedule VI of these regulations, on an ongoing basis.
(2) The net worth requirements of an applicant or a Payment Service Provider shall be reviewed by the Authority from time to time.
(3) Requirement of additional net worth, if any, as a result of the review undertaken under sub-regulation (2), will have to be satisfied:
(a) by an applicant, at the time of application or, if the application has already been submitted, before the grant of authorisation.
(b) by a Payment Service Provider, within 180 days from the date of communication by the Authority about the additional net worth requirement.
Fit and Proper requirement
8. (1) An Applicant or a Payment Service Provider shall ensure that its Principal Executive, directors, Key Managerial Personnel and persons exercising control over the Applicant or a Payment Service Provider (hereinafter referred to as “Relevant Persons”) satisfy the “fit and proper requirements” (FPR) specified in Schedule III of these regulations at all times.
(2) The Authority may undertake an evaluation of any Relevant Person/s under the FPR criteria during the time of processing the request for authorisation as a Payment Service Provider or any time thereafter.
(3) In case of any difference in the outcome of the evaluation under the FPR undertaken by an Applicant or a Payment Service Provider and that undertaken by the Authority, the outcome of the evaluation undertaken by the Authority shall prevail.
Authorisation requirements
9. While evaluating an application under sub-regulation (1) of regulation 4, the Authority shall take into account all matters which it deems relevant for grant of authorisation, including, whether:
a. Principal Executive, directors, Key Managerial Personnel of the Applicant or its associated company have adequate experience, including an existing authorisation to provide similar services in any other jurisdiction, in the activities that it seeks to provide as a Payment Service Provider;
b. the Applicant possesses the necessary infrastructure like adequate office space, equipment, communication facilities and manpower to effectively discharge its activities;
c. the Applicant satisfies the net worth requirement as specified in these regulations;
d. the financial soundness of the Applicant;
e. the Applicant and its Principal Executive, directors, Key Managerial Personnel and persons exercising control over the applicant satisfy the “fit and proper” requirements;
f. the Applicant, its group entities or any of its associates have in the past been refused certificate by the Authority and if so, the ground for such refusal;
g. the Applicant or its Principal Executive, directors, Key Managerial Personnel is subject to any proceeding for breach of law by the Authority; and
h. the interests of Payment Services Users, including the terms and conditions governing their relationship with a Payment Service Provider.
Issuance of in-principle approval
10. (1) After considering an application for authorisation, if the Authority is satisfied that the said application, prima facie, satisfies the conditions for granting authorisation, the Authority shall issue an “in-principle approval” letter to the Applicant and may require the Applicant to satisfy such conditions as may be specified by the Authority in the “in-principle approval” letter.
(2) Grant of authorisation to an Applicant who has been issued “in-principle approval” shall be at the sole discretion of the Authority and the issue of “in-principle approval” by the Authority shall not automatically entitle the Applicant to be granted an authorisation under regulation 11.
(3) The Applicant shall intimate to the Authority about any change of ownership or control of the Applicant during the period when an “in-principle approval” is in force.
(4) The Authority, after receipt of intimation under sub-regulation (3) or when it otherwise becomes aware of any change of control of the applicant to whom an “in-principle approval” has been issued, shall undertake a review of its decision to grant “in-principle approval” to the applicant.
(5) The outcome of the review undertaken at sub-regulation (4) shall be communicated to the applicant.
(6) If as a result of the review under sub-regulation (4), the Authority proposes to revoke the “in-principle approval” granted to the applicant, the Authority shall communicate its desire to do so to the Applicant and provide the Applicant a reasonable opportunity of being heard before taking a final decision in the matter.
Grant of authorisation
11. (1) The Authority may, on being satisfied that the Applicant has complied with the conditions laid down in these regulations and is eligible to act as a Regular Payment Service Provider or Standard Payment Service Provider, grant Certificate of Authorisation to the Applicant subject to the conditions as the Authority may deem fit.
(2) The Certificate of Authorisation granted under sub-regulation (1) shall be valid till the same is revoked by the Authority or surrendered by the Payment Service Provider.
(3) Every Significant Payment Service Provider shall maintain security deposit of a prescribed amount (or its equivalent in a specified foreign currency) with the Authority, for the due performance of its obligation to every Payment Service User who is a customer of the Significant Payment Service Provider.
(4) The prescribed amount of security deposit (or its equivalent in specified foreign currency) shall be as follows:
i. $100000 – where the total value of all payment transactions per month is less than or equal to $6 million
ii. $200000 – where the total value of all payment transactions per month is more than $6 million
(5) The security deposit mentioned in sub-regulation (3) shall be —
(a) in the form of a bank guarantee that satisfies such requirements as the Authority may specify by notice in writing; or
(b) in such other form as the Authority may, in any particular case, allow.
(6) The Payment Service Provider shall, at any time after the grant of authorisation under sub-regulation (1), intimate to the Authority of any material change in the information or particulars previously furnished along with the application.
Refusal of Authorisation: –
12. (1) If the Authority is of the opinion that the authorisation cannot be granted, it shall communicate the deficiencies to the Applicant giving it thirty (30) days time to rectify them.
(2) If the Applicant fails to rectify such deficiencies within the specified time, the Authority shall refuse to grant authorisation and shall communicate the same to the Applicant, giving reasons for such refusal.
Provided that no such refusal shall be made without giving the Applicant a reasonable opportunity of being heard.
(3) The application filed under sub-regulation (1) of regulation 4 may be withdrawn by the Applicant at any time before the grant of authorisation without refund of fees paid, if any, to the Authority.
(4) The Applicant whose application is refused under sub-regulation (2) or withdrawn under sub-regulation (3) may submit a fresh application for authorisation after a period of six months from the date of communication of refusal of the application by the Authority under sub-regulation (2).
Revocation of authorisation
13. (1) If the Authority is satisfied that a Payment Service Provider has failed to comply with any of the conditions of the authorisation, provision/s of these regulations, orders or directions of the Authority, violation of fit and proper criteria or that the activity of the Payment Service Provider is being carried on in a manner prejudicial to the interests of the Payment Service Users, it may revoke the authorisation granted to such Payment Service Provider and cancel the Certificate of Authorisation .
(2) The order for revocation of the authorisation and cancellation of the Certificate of Authorisation shall be issued after giving the concerned Payment Service Provider, a reasonable opportunity of being heard.
Surrender of Authorisation
14. (1) A Payment Service Provider may file an application with the Authority, in compliance with the conditions and in the format provided in Schedule IV, for surrender of its the authorisation granted to it.
(2) On perusal of the application and on being satisfied that the surrender of authorisation is unlikely to cause any material adverse effect to the financial ecosystem of the IFSC or the interests of the Payment Service Users, the Authority may permit surrender of such authorisation subject to such conditions as it may think fit.
(3) The Authority may, by an order in writing, specify the date from which the authorisation shall cease to have effect.
Application of security deposit on revocation or surrender of authorisation
15. (1) Where a Significant Payment Service Provider has surrendered its authorisation or the authorisation of a Significant Payment Service Provider has been revoked by the Authority, the Authority may apply the security deposit, if any, mentioned in sub-regulation (3) of regulation 11, to pay any sums outstanding and claimed by Payment Service Users who are customers of the Significant Payment Service Provider.
(2) Where a Significant Payment Service Provider has surrendered its authorisation or the authorisation of a Significant Payment Service Provider has been revoked by the Authority, the Authority shall release the security deposit, if any, mentioned in sub-regulation (3) of regulation 11 or any balance thereof if it is satisfied that:
(a) there is no outstanding claim by any Payment Service User who is a customer of the Significant Payment Service Provider; and
(b) the Significant Payment Service Provider has satisfied all conditions for surrender of authorisation under these regulations.
Chapter III
Commencement of operations
16. (1) The Payment Service Provider shall commence its operations within six months from the date of issue of Certificate of Authorisation.
(2) The Payment Service Provider shall submit any request for extension of time for commencing operations at least 3 months before the date of commencement of operations in sub-regulation (1).
(3) The application under sub-regulation (2) shall include complete details of the reasons behind the request for extension, duration of extension sought, steps being undertaken to overcome the delay and any other information which, in the opinion of the Payment Service Provider, is relevant to the request for extension.
(4) The Authority shall consider a request under sub-regulation (2), either accept or refuse the same and communicate its decision to the Payment Service Provider.
Chapter IV
Governance
Governance arrangements
17. (1) A Payment Service Provider shall document its governance arrangements i.e., the framework under which its Board and Management of such operates, comprehensively and clearly.
(2) The governance arrangements to be documented in sub-regulation (1) should, at minimum, include the following components namely:
a. role and composition of the Board and any board committees;
b. senior management structure;
c. reporting lines between management and the board;
d. ownership structure;
e. internal governance policy;
f. design of risk management and internal controls;
g. procedures for the appointment of board members and senior management;
h. processes for ensuring performance accountability;
(3) A Payment Service Provider shall not undertake activities other than providing Payment Services without the prior permission of the Authority and subject to such conditions as may be specified by the Authority
(4) A Payment Service Provider shall devise clear and comprehensive rules and procedures for the Payment Services provided by it and shall provide sufficient information to enable Payment Service Users to have an accurate understanding of the risks, fees, and other material costs they incur by availing such Payment Service/s.
18. (1) A Payment Service Provider shall develop a framework for management of risks including risk-management policies, procedures, and systems that enable it to identify, measure, monitor, and manage the range of risks that arise in or are borne by it while providing payment service/s. Such risk-management frameworks shall be subject to periodic review by the Board of the Payment Service Provider.
(2) A Payment Service Provider shall establish a robust operational risk-management framework with appropriate systems, policies, procedures, and controls to identify, monitor, and manage operational risks.
(3) A Payment Service Provider that establishes a link with one or more Payment Systems shall identify, monitor, and manage link-related risks.
Chapter V
Risk management of service relationships
Identification of critical services and assessment of criticality
19. (1) A Payment Service Provider shall put in place a risk-based framework to assess the criticality of services that they receive or plan to receive from a Service Provider. Such assessment shall be undertaken at the time of commencement of operations and at regular intervals thereafter.
(2) The framework in sub-regulation (1) shall consider various factors relevant to identifying a service as “critical” including:
a. the financial, operational and strategic importance of the service to the Payment Service Provider.
b. the level of tolerance for disruption acceptable to the Payment Service Provider regarding critical business operations that rely or plan to rely on the Service Provider.
c. the nature of any data or information shared by the Payment Service Provider with the Service Provider under a Service Relationship.
d. the ease of substitutability of a service or lack thereof.
Onboarding and ongoing monitoring of Service Providers
20. (1) A Payment Service Provider shall conduct appropriate planning and due diligence before entering into a Service Relationship arrangement for a critical service. The level of due diligence shall be proportional to the criticality of the relevant service as required to be identified in sub-regulation (1) of regulation 19.
(2) Factors that are to be considered in the due diligence process may include:
a. Operational and technical capability and track record, including (if applicable) drawing on any prior engagement between the Payment Service Provider and the Service Provider (in general or in connection with the service to be provided);
b. Financial soundness insofar as it can affect the delivery of its services;
c. Internal controls and risk management, including its ability to manage ICT, cyber security and other operational risks;
d. Management of supply chain risks, including use and oversight of nth-party service providers;
e. Geographic dependencies and management of related risks;
f. Key personnel involved in the delivery of the relevant service and their competency;
g. Potential conflicts of interest;
h. Existence of any recent or pending relevant complaints, investigations or litigation against the Service Provider and (if relevant) nth-party service provider;
i. Ability to deliver the critical service in a way that allows the financial institution to comply with its legal and regulatory obligations;
j. Ability to support the financial institution’s business strategy and plans;
k. Level of substitutability of the service and Service Provider.
(3) The services being received by a Payment Service Provider shall be procured through legally binding arrangements between the Payment Service Provider and a Service Provider, including clear contractual provisions setting out the respective rights and obligations of a Payment Service Provider and a Service Provider.
(4) The legal arrangements in sub-regulation (3) must include a provision of sharing of information by the service provider with the Authority.
(5) A Payment Service Provider shall establish processes for ongoing monitoring of the Service Provider’s ability to deliver the critical services in line with its contractual obligations.
Exit strategies
21. (1) A Payment Service Provider shall identify, document and to the extent practically feasible, test their strategy for exiting Service Relationship involving critical services.
(2) Such strategy shall cover a range of scenarios including planned migration of services but also include adverse events like:
(a) Significant or persistent breach of applicable laws, regulations or contractual terms;
(b) Deterioration in the quality of the services provided;
(c) Weaknesses in the Service Provider’s governance, financial condition, resilience or risk management that have impacted or could reasonably impact the delivery of critical services;
(d) Extended disruption to critical services that cannot be managed through other business continuity measures.
Reporting of incidents
22. The Payment Service Provider shall require the Service Providers to have clearly defined processes for identifying, investigating, remediating and notifying Payment Service Provider in a timely manner of incidents that impact the Service Provider’s ability to deliver agreed-upon services.
Record of third-party service relationships
23. The Payment Service Provider shall maintain complete, up-to-date records of their Service Relationship that identify the criticality of different services.
Chapter VI
Duties of the Payment Service Provider
Duty to protect Applicable Funds:
24. (1) It shall be the duty of the Payment Service Provider to safeguard Applicable Funds by following the directions specified in Schedule VII.
(2) The Payment Service Provider must, at all times, keep Applicable Funds segregated from any other types of funds that it holds.
Duty to comply with Know Your Customer/ Anti Money Laundering/ Combating the Financing of Terrorism Guidelines
25. (1) The Payment Service Provider shall ensure compliance with International Financial Services Centres Authority (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022, and other provisions of Prevention of Money Laundering Act, 2002 and the Rules made thereunder including any statutory modification(s) or re-enactment thereof for the time being in force.
(2) The Payment Service Provider using agents for the provision of their services shall :
a. maintain an up-to-date list of such agents
b. include such agents in their AML/CFT programmes and monitor them for compliance with these programmes
(3) A Payment Service Provider shall be responsible and accountable for the transactions/actions undertaken by their authorised agents, retail outlets and merchants.
Duty to comply with laws
26. The Payment Service Provider shall comply with all applicable laws in India as well all applicable laws of any jurisdictions outside India where it provides services or where the Payment Service Users are based.
Duty of co-operation with the Authority
27. A Payment Service Provider must deal with the Authority in an open and co‑operative manner. A Payment Service Provider shall keep the Authority duly informed of any significant event(s) relating to the Payment Service Provider.
Duty towards Payment Service Users
28. A Payment Service Provider shall ensure that due regard is given to protecting the interests of Payment Service Users and the relevant information is communicated to them in a clear and fair manner that minimises the possibility of them getting misled.
Redressal of grievances
29. (1) A Payment Service Provider shall put in place a framework for redressal of grievances of the Payment Service Users.
(2) A Payment Service Provider shall maintain records regarding grievances received by it and redressal of such grievances.
(3) A Payment Service Provider must depute adequate staff at its permanent place of business or registered office in IFSC to address any queries or complaints from any payment service user that uses any payment service.
Chapter VII
Place of business or registered office: –
30. (1) A Payment Service Provider who wants to carry on some activities of a payment service from a place of business other than from IFSC shall seek prior approval from the Authority.
(2) The Authority may permit a Payment Service Provider to offer payment service from a place of business other than IFSC, subject to such conditions as the Authority may think fit.
.Chapter VIII
Returns, Documents and Other Information
Submission of returns, documents or other information etc.
31. (1) Every Payment Service Provider shall be required to submit information in the format and the manner as specified by the Authority.
Furnishing of accounts and Balance Sheet
32. Every Payment Services Provider shall submit to the Authority, a copy of the audited financial statements, which includes Balance-sheet, Profit and Loss statement, Cash/Fund flow statement along-with the auditor’s report thereon within three months from the date of its finalisation to the Authority, along with the remarks or observations of the auditor, if any, on the conduct of the business, state of accounts, etc., and a suitable explanation on auditor’s observations/remarks.
Provided that the Authority may, on an application made by the Payment Services Provider, extend the said period of three months for furnishing of returns by a further period not exceeding one month.
Maintenance of books of accounts, records and other documents
33. Every Payment Service Provider shall maintain and preserve the following books of accounts, records and documents, in a format suitable for electronic retrieval, for a minimum of ten years from the date of commencement of operations, namely: –
(a) a copy of the balance sheet at the end of each accounting period;
(b) a copy of profit and loss account for each accounting period;
(c) a copy of the auditor’s report on the accounts for each accounting period;
(d) a statement of net worth for each quarter;
(e) documentation relating to compliance with AML and CFT guidelines;
(f) documents relating to account opening of each client and any power of attorney or signature authority forms of the clients;
(g) relevant records and documents relating to its activities in capital markets;
(h) such other books of accounts, records and documents as may be specified by the Authority from time to time.
Schedule I
Payment Services, Thresholds and Conditions
[See Section 12 of the Act and regulation 4(4) and 4(5)]
Part A
Activities which are Payment Services
1. The following activities, except the activities specified in Part B, are Payment Services for the purposes of these regulations :
a) account issuance service (including e-money account issuance service);
b) e-money issuance service;
c) escrow service;
d) cross border money transfer service;
e) merchant acquisition service.
Part B
Activities which are not Payment Services
2. The following activities are not Payment Services for the purposes of these regulations –
a) payment transactions on behalf of the payer or the payee, if performed by an agent authorised to negotiate or conclude the sale or purchase of goods or services on behalf of the payer or the payee, as the case may be;
b) payment transactions based on any of the following documents, each being a document drawn on a person with a view to placing money at the disposal of the payee;
i. cheque, cashier’s order, drawing voucher, dividend warrant, demand draft, remittance receipt, traveller’s cheque or gift cheque;
ii. paper postal order;
c) payment transactions carried out within a payment or securities settlement system between payment service providers and settlement agents, central counterparties, clearing houses, central banks or other participants in the system;
d) payment transactions related to securities asset servicing, including dividends, income or other distributions, or redemption or sale, carried out by persons referred to in sub-paragraph (c);
e) payment transactions carried out between payment service providers, or their agents or branches, for their own account;
f) payment transactions and related services between a holding company and its subsidiary or between subsidiaries of the same holding company, without any intermediary intervention by a payment service provider other than a company belonging to the same group;
g) transporting currency, including the collection, processing and delivery of the currency, where the service is carried on as a business;
h) services provided by technical service providers, being an entity that supports the provision of payment services, without being in possession of the funds to be transferred at any time, including the services of:
(i) processing and storage of data;
(ii) trust and privacy protection services;
(iii) data and entity authentication;
(iv) information technology;
(v) communication network provision; and
(vi) provision and maintenance of terminals and devices used for payment services;
i) services based on specific payment instruments that can be used only in a limited way and meet one of the following conditions:
(i) allow the holder to acquire goods or services only in the premises of the issuer of the payment instrument;
(ii) are issued by an issuer and allow the holder to acquire goods or services only within a limited network of service providers which have direct commercial agreements with the user;
(iii) may be used only to acquire a very limited range of goods or services;
Part C
Thresholds and Conditions required for Authorisation as a Significant Payment Service
Provider
Th3. e following are the thresholds and conditions to be met by an applicant or a Regular Payment Service Provider to be eligible for authorisation as a Significant Payment Service Provider –
a) if the applicant or the Regular Payment Service Provider intends to carry or carries on a business of providing one or more of the payment services (other than e-money account issuance service) mentioned in Part A of this schedule:
(i) the monthly average, over a calendar year, of the total value of all payment transactions that are accepted, processed, executed or intended to be accepted, processed, executed exceeds –
A) $2 million (or its equivalent in a specified foreign currency), for any one of the payment services (other than e-money account issuance service) mentioned in Part A of this schedule or;
B) $4 million (or its equivalent in a specified foreign currency), for two or more of the payment services (other than e-money account issuance service) mentioned in Part A of this schedule;
b) if the applicant or the Regular Payment Service Provider intends to carry or carries on a business of providing an e-money account issuance service:
(i) the average daily value, over a calendar year, of all e-money that is stored in any payment account intended to be issued or issued by the applicant or the Regular Payment Service Provider exceeds $3 million (or its equivalent in a specified foreign currency);
c) if the applicant or the Regular Payment Service Provider intends to carry or carries on a business of providing an e-money issuance service:
(i) the average daily value, over a calendar year, of the total value in one day of all e-money that is intended to be issued or issued by the applicant or the Regular Payment Service Provider exceeds $3 million (or its equivalent in a specified foreign currency);
Schedule II
Application form
[See Section 12 of the Act and regulation 4(1)]
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Section A :General Information to be filled by applicants |
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| S. No. |
Particulars | Comments / Remarks (for IFSCA use) |
| 1. | IFSCA Regulations/Framework/Circulars under which Application is being made by the Applicant | |
| 2. | Name of the Applicant | |
| 3. | Legal form of the Applicant along with Registration/ Identification No. and documentary proof.
For example, in case of a company provide the Certificate of Incorporation, Memorandum of Association and Articles of Association. |
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| 4. | Date of incorporation of the Applicant | |
| 5. | Name and Address of Head/ Corporate Office of the Applicant’s Parent Entity(ies) (also provide FAX no(if available), Email ID and Website) | |
| Address of Registered Office of the Applicant’s Parent Entity(ies) (also provide FAX no(if available), Email ID and Website) | ||
| Address of principal place of Business of the Applicant’s Parent Entity(ies) (also provide FAX no(if available), Email ID and Website) | ||
| 6. | Provisional address of the Applicant’s proposed IFSC Unit. Attach copy of Provisional Letter of Allotment. | |
| 7. | Details of Person Authorised with respect to this
application (Name, Designation, Email, Phone, |
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| 8. | i) If Applicant’s parent entity(ies) is regulated by Financial Sector Regulator(s) provide the following details:
Name of Regulator, Name of Country, Type of Activity, License/Registration No., Date of ii) If any of the Applicant’s group1 entities are Name of Regulator, Name of Country, Type of Activity, License/ Registration No., Date of 1for the purpose of this question, the term group shall include: JV’s/ Subsidiaries / Associates / Promoter / Body Corporate operating under common brand name |
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| 9. | Whether Applicant’s Parent Entity, including all promoters/controlling shareholders/senior management/ founders are from a country identified in the latest public statement of Financial Action Task Force as:a) High-risk jurisdiction subject to a call for Action; or (Yes/No)b) a Jurisdiction under Increased Monitoring. (Yes/No) If yes to any of the above, provide further details. |
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| 10. | Whether Applicant’s group2entities, having transactions/ commercial engagements with applicant entity are from a country identified in the latest public statement of Financial Action Task Force as:
a) a High-risk jurisdiction subject to a call for action; or (Yes/No) b)a Jurisdiction under Increased monitoring. (Yes/No) If Yes to any of the above, provide further details. 2for the purpose of this question, the term group shall include JVs/ Subsidiaries / Associates / Promoter / Body Corporate operating under common brand name |
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| Section B: Corporate Information | ||
| 11. | Copy of the Resolution passed by the Applicant authorizing its Director(s)/Partner(s)/ Authorized Person(s) as applicable, for enabling the Applicant to:
Attach copy/copies |
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| 12. | Provide details of ‘Information on Management’ as per given format in Section F. | |
| 13. | Shareholding pattern / List of major shareholders3 (for all holding 10% or more of shares or voting rights or distributable dividend) / Persons exercising Control4 of Applicant.
a) Authorised Capital: b) Paid up Capital / Partners Capital contribution: c) Subscribed Capital and Issued Capital: d) Face value of shares: e) Details of the Shareholding or partnership structure as below: |
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