Master Directions issued by the Reserve Bank of India (RBI) under the Payment and Settlement Systems Act, 2007 (PSS Act). The purpose of this framework is to enhance clarity, ease of access, and reduce the compliance burden.
1. Standardised Computation of Net-Worth
Applicable Entity: All existing PSOs and New ApplicantsSpecific Changes Required
- Strict Definition: Net-worth must now strictly consist of paid-up equity capital, preference shares compulsorily convertible to equity, free reserves, balance in share premium account, and capital reserves (surplus from asset sales).
- Mandatory Deductions: Reserves created by revaluation of assets, accumulated loss balance, book value of intangible assets, Deferred Revenue Expenditure, and Deferred Tax Assets must be deducted from the total.
- Statutory Certification: Applications and renewals must include a net-worth certificate from a Statutory Auditor in the newly prescribed Annexure format. Newly incorporated entities must submit a provisional balance sheet.
Management Action Plan
- Immediate Audit Review: Direct the CFO and internal finance team to recalculate current net-worth strictly matching the new inclusions/deductions formula.
- Asset Re-evaluation: Exclude any intangible assets or revaluation reserves from internal net-worth projections to avoid regulatory shortfalls.
- Statutory Auditor Alignment: Provide the prescribed RBI Annexure format to external statutory auditors immediately to ensure all future certifications conform exactly to the mandated template.
2. Investment in Entities from FATF Non-Compliant Jurisdictions
Applicable Entity: Existing PSOs & Entities seeking PSO AuthorisationSpecific Changes Required
- Restriction on Significant Influence: Fresh investments from (or routed through) FATF non-compliant jurisdictions are prohibited from acquiring ‘significant influence’ directly or indirectly.
- 20% Threshold Limits: Aggregate fresh investments from these jurisdictions must remain below 20% of total voting power.
- Potential Voting Power Included: The 20% limit applies to current voting power AND potential voting power (convertible instruments, contingent voting rights).
- Grandfathering Clause: Existing investments made prior to a jurisdiction’s classification as non-compliant may continue to support business continuity.
Management Action Plan
- Investor Due Diligence (KYC/AML): Mandate the Legal/Compliance team to screen all current and prospective investors against the latest FATF ‘High-Risk’ and ‘Increased Monitoring’ lists.
- Cap Table Audit: Review all convertible instruments and shareholder agreements. Ensure no future trigger could result in a FATF non-compliant investor crossing the 20% voting power threshold.
- Update Funding Policy: Amend the corporate investment policy to explicitly restrict term sheets that offer >19.9% equity/convertible debt to entities based in flagged jurisdictions.
3. Perpetual Validity for Certificate of Authorisation (CoA)
Applicable Entity: Existing Authorised PSOs & New EntitiesSpecific Changes Required
- Shift to Perpetual Licensing: Authorisation will now be granted on a perpetual basis rather than up to 5-year intervals.
- Conditionality for Existing PSOs: Perpetual validity at the time of renewal is subject to full compliance with initial terms, fulfillment of entry norms (net-worth), robust grievance redressal, and zero major supervisory concerns.
- Penalty for Non-Compliance: Entities failing to meet conditions will only receive a 1-year conditional renewal. Continued failure will result in revocation of the CoA.
Management Action Plan
- Proactive Compliance Dashboard: Establish a continuous monitoring system (dashboard) for entry norms, capital adequacy, and customer grievance resolution times.
- Mock RBI Audit: Conduct an annual internal ‘Mock Audit’ focusing on offsite/onsite monitoring parameters to ensure no adverse reports are generated by regulators.
- Grievance Redressal Overhaul: If grievance resolution metrics are poor, invest immediately in customer support infrastructure to secure perpetual validity during the next renewal cycle.
4. Framework for Voluntary Surrender of CoA
Applicable Entity: PSOs intending to discontinue operationsSpecific Changes Required
- Strict Extinguishment of Liabilities: An entity must submit a Board Resolution, a CA-certified statement of escrow balances, and a ‘Memorandum of Procedure’ (MoP) detailing how customer/merchant liabilities will be repaid.
- Public Notice Mandate: The entity must issue a public notice in English, Hindi, and a vernacular language in print/visual media on three different occasions detailing the refund process and naming a Nodal Officer.
- Escrow Freeze (3-Year Rule): If liabilities cannot be fully extinguished, the remaining escrow balance cannot be recognized as income or moved to P&L for a period of 3 years post-cancellation. The entity must honor claims during this period.
Management Action Plan
- Exit Strategy Formulation: If planning a pivot or shutdown, draft a comprehensive exit MoP. Ensure the escrow account is fully funded and reconciled to cover 100% of outstanding liabilities.
- PR & Legal Coordination: Pre-draft the trilingual public notices and assign a dedicated Nodal Officer specifically for handling post-surrender grievance and refund claims.
- Accounting Controls: Instruct the accounting department to strictly ring-fence unextinguished escrow funds for 36 months, preventing accidental transfer to corporate profit and loss accounts.
5. Introduction of Cooling Period
Applicable Entity: Entities (and Promoters) whose CoA was revoked, rejected, or surrenderedSpecific Changes Required
- 1-Year Ban: A strict cooling period of one year is imposed on entities trying to reapply if their CoA was revoked, not renewed, voluntarily surrendered, or if their application was rejected.
- Promoter-Level Applicability: The ban extends to new entities set up by the promoters of the penalized/surrendered entity.
- Waiver Clause: RBI retains the right to waive or curtail the cooling-off period in exceptional cases based on representation.
Management Action Plan
- Application Quality Control: For new ventures, assure the application is 100% complete and compliant before submission. A rejected application now costs a mandatory 1-year delay.
- Promoter Restructuring Check: If the Board intends to launch a new payment system under a sister company, legal counsel must verify if any promoter is currently serving a cooling period from a past venture.
6. On-Tap Authorisation for Retail Payment Systems
Applicable Entity: Entities desirous of operating BBPOU, TReDS, or WLAsSpecific Changes Required
- Continuous Application Window: Authorisations for Bharat Bill Payment Operating Units (BBPOU), Trade Receivables Discounting System (TReDS), and White Label ATMs (WLA) are available on-tap.
- Stringent Financial Metrics:
- BBPOU & WLA: Minimum Net-worth of ₹100 Crore at all times.
- TReDS: Minimum paid-up equity of ₹25 Crore. Non-promoters capped at 10% equity.
- Operational Criteria: WLA operators must adhere to strict deployment ratios heavily favoring rural regions (1:2:3 for Metro/Urban : Semi-Urban : Rural). BBPOU applicants must have 1 year of domain experience in bill collection.
- Interoperability & Fit/Proper: Mandatory interoperability among systems. Promoters must pass the RBI’s stringent ‘Fit and Proper’ criteria.
Management Action Plan
- Capital Readiness: Before applying, ensure the ₹100 Crore / ₹25 Crore capital is deeply secured, unencumbered, and meets the new Net-Worth computation definitions (Amendment 1).
- WLA Geographical Strategy: If applying for WLA, overhaul the logistics and deployment strategy to aggressively target rural and semi-urban tier geographies to satisfy the mandatory 1:2:3 deployment ratio.
- Board Vetting: Conduct thorough background checks on all directors and promoters to ensure they clear the ‘Fit and Proper’ criteria (no insolvency, no economic offenses, clean financial integrity).