RBI updates authorization rules for payment systems
The Reserve Bank of India (RBI) has issued Master Directions outlining new authorization rules for payment system operators. Effective June 15, 2026, these directions apply to all entities seeking or operating a payment system under the PSS Act.
Rigorous standards for payment system operators
The Master Directions detail comprehensive eligibility criteria for entities seeking or holding authorization to operate a payment system.
Applicants must submit their forms via the RBI portal, adhering to specific capital and net-worth requirements, which are outlined in separate guidelines on the RBI website.
A statutory auditor's certificate is mandatory to evidence net-worth compliance, with provisional balance sheets accepted for newly incorporated entities.
Crucially, the entity, its promoters, and promoter groups must meet the Reserve Bank's 'fit and proper' criteria.
This includes a sound record of integrity, financial integrity for directors, and absence of disqualifications such as convictions for moral turpitude, insolvency, or regulatory debarment.
The RBI's decision on 'fit and proper' status is final, emphasizing the importance of overall financial strength, technological basis, management, and governance.
Long-term authorization, global compliance
The directions introduce specific provisions regarding investments from jurisdictions identified as non-compliant by the Financial Action Task Force (FATF).
New investors from or through such jurisdictions are prohibited from acquiring 'significant influence' in Payment System Operators (PSOs), meaning their aggregate investment must remain below 20 percent of voting power.
Existing investors from these jurisdictions may continue their investments to support business continuity in India.
Furthermore, the RBI now grants authorization to new entities on a perpetual basis.
Existing PSOs can also receive perpetual validity upon renewal, provided they demonstrate full compliance with terms, have no major regulatory concerns, and no adverse reports from other regulators.
Clarity for a dynamic sector
The RBI's new Master Directions bring much-needed clarity to the authorization and operational landscape for payment system operators.
While perpetual validity offers stability, the reinforced 'fit and proper' criteria ensure only robust entities participate.
This dual approach balances ease of doing business with critical safeguards for financial integrity.