To further revolutionize financial inclusion and digital payments in the country, the RBI formally launched RuPay credit cards on UPI, UPI Lite and Bharat Billpay cross-border bill payments during the recently concluded Global Fintech Fest, 2022.
Bharat Billpay Cross-border payments:
- The RBI has allowed foreign inward remittances under its Rupee Drawing Arrangement (RDA), to be transferred to KYC-compliant bank accounts of the biller (beneficiary) through the Bharat Bill Payment System (BBPS).
- This means foreign inward remittances by NRIs for utility, education and other bill payments can now be undertaken using the BBPS mechanism which has the benefits of offering standardised bill payments experience, centralized customer grievance redress mechanism, and payment of uniform customer convenience fee.
- Federal Bank in partnership with UAE’s Lulu Exchange is the first bank to go live on the BBPS cross-border bill payment mechanism.
RuPay Credit Card on UPI
- NPCI’s RuPay credit card will be linked to a virtual payment address i.e. UPI. This means customers will be able to make payments using UPI mechanism from their RuPay credit cards.
- This will help democratize formal credit amongst a wider category of retail consumers considering the massive outreach of UPI as a payments mechanism.
- Punjab National Bank, Union Bank of India and Indian Bank are the first banks to go live with the RuPay credit card on UPI for its customers.
UPI Lite:
- Considering the year-on-year growth in volume of low-value UPI payment transactions, it was essential that a separate mechanism was devised to facilitate such transactions in offline mode.
- This will allow users to make small-value payments in a near-offline mode.
- The upper limit for a single transaction on UPI Lite will be Rs. 200 and total limit for on-device wallet would be under Rs. 2,000 at any point of time.
RBI publishes guidelines on digital lending; MoF to curb illegal loan apps
To streamline digital lending practices, the RBI has implemented some recommendations of the Digital Lending Report (“Framework”). To further supplement the digital lending framework, the RBI has formed detailed guidelines (“Guidelines”) to ensure regulatory diligence upon market players.
Under the guidelines, “digital lending” is defined as a remote and automated lending process using digital technologies for the process of customer acquisition, the credit assessment, loan approval, disbursement, recovery, etc.
Further, the guidelines define Lending Service Providers (LSPs) as agents of the regulated entities carrying one or more of the functions of the lender. And, it defines Digital Lending Apps/Platforms (DLAs) as mobile or web-based applications of the regulated entities or the LSPs. The guidelines strictly require both the LSPs and DLAs to adhere to the extant outsourcing norms.
In line with the framework, the guidelines also impose obligations on:
- Lenders to provide standardised Key Fact Statement to the borrower.
- Prohibition on automatic increase in credit limit without explicit consent of borrower.
- Lenders to provide cool-off period to exit the loan without any prepayment penalty.
- Lenders and their LSPs to appoint a nodal grievance redressal officer.
- DLAs to only collect need-based data with customer consent and clear audit trails.
The Ministry of Finance passed directions to the RBI and the MCA to take measures to reduce the menace of illegal loan apps which indulge in charging exorbitantly high-interest rates and processing/hidden charges on consumers, imposing predatory recovery measures (involving blackmailing) and intimidating borrowers.
Ministry of finance directions to the RBI:
- Prepare a “whitelist” of all legal apps and thereon MeitY to ensure only “whitelisted” loan apps are hosted on app stores.
- To monitor the ‘mule/rented’ accounts which are used for engaging in money laundering.
- To review and cancel licenses of dormant NBFCs.
- To ensure that registration of PAs be completed within a definite timeframe.
- Increase cyber awareness amongst customers, bank employees and law enforcement agencies.
RBI publishes alert list of entities not authorized to deal in forex
In February 2022, the RBI cautioned the public not to undertake foreign exchange transactions on unauthorised electronic trading platforms (ETPs). It was observed that certain forex platforms were providing forex trading facilities over social media platforms, search engines, OTT platforms, gaming apps etc.
In terms of Chapter III of the Foreign Exchange Management Act, 1999 (FEMA), only resident persons can undertake forex transactions and only with authorized persons and for permitted purposes. Similarly, trading of forex has to be carried out only on authorized ETPs.
With the sudden spurt of ETPs and forex trading since the COVID-19, it was only essential that such a watchlist be published to foster retail consumer protection.
On account of continuous references on the clarification of authorisation status of ETPs, the RBI put in place an alert list which states entities not authorized to deal in forex and not authorized to operate ETPs for forex trading.
The resident persons under FEMA must undertake forex trading/transactions with:
- Authorised AD Category-I, II and III banks;
- ETPs authorized by either the RBI or NSE, BSE and MSEI;
- Authorized Full Fledged Money Changers (FFMCs); and
- Overseas Principals, Indian Agents and Sub-Agents under the Money Transfer Service Scheme.
The alert list also contains compounding orders made by the RBI for contravention of the FEMA and rules and regulations, along with a user manual on the FIRMS reporting. In simple terms, the alert list is a comprehensive guidance on persons and entities authorized to engage in forex transactions.
Impact on the banking industry and regulated entities
The alert list will help regulated entities in their due diligence of the authorisation status of ETPs and FFMCs before undertaking any form of business partnership with them.
Impact on consumers and end-users
The alert list will help consumers to take stock of authorisation status of the concerned entity or the ETP before undertaking forex transactions or trading.
Other notable updates
Central government amends the Foreign Trade Policy to permit trade settlement in INR
In line with the RBI circular on international trade settlement in INR, the Central Government has amended the Foreign Trade Policy, 2015-2020 to permit invoicing, payment and settlement of exports and imports in INR.
MAS and IFSCA ink pact to pursue fintech innovation
The Monetary Authority of Singapore (MAS) and the IFSCA signed Fintech Cooperation Agreement to leverage regulatory sandbox frameworks and sharing of information on financial products and services.
IFSCA publishes guidelines on implementing fintech incentive scheme
The IFSCA has released detailed guidelines detailing eligibility criteria, implementation mechanism, and conditions for awarding grants to fintech entities as part of its Fintech Incentive Scheme, 2022.
Delhi HC upholds constitutional validity of PA/PG Guidelines, 2020
In Lotus Pay Solutions Pvt. Ltd. v. Union of India, the Delhi HC has upheld the constitutional validity of the RBI Guidelines on PAs and PGs, 2020 on the grounds of public interest involved in framing of the guidelines.
RBI announces theme-neutral fifth cohort of regulatory sandbox
RBI has announced opening of the fifth cohort of its regulatory sandbox on a neutral theme and On Tap applications for the second cohort on cross-border payments. The RBI also communicated a list of entities selected for the test phase of the cohort on retail payments.
NPCI initiates self-attestation process in PCOMP portal
NPCI has renamed the self-attestation portal as the Product Compliance Portal (PCOMP) whereby any pending self-attestation compliance for FY 2021-22 and FY 2022-23 Q1 new checklist has to be completed by September 30.
| This edition has been edited by Sunny Lamba. |
References:
RuPay credit cards on UPI | BBPS Cross-border payments | RBI Digital Lending Guidelines | Unauthorised forex trading alert list
