INDIA Law and Practice Contributed by: Shilpa Mankar Ahluwalia, Purva Anand and Ansh Jain, Shardul Amarchand Mangaldas & Co
Payment Gateways Payment gateways (PGs) are entities that provide technology infrastructure to route/facilitate process - ing of online payment transactions, without handling any funds. PAs and PGs are governed by the PA/PG Guidelines, requiring PAs to be licensed by the RBI, while pre - scribing recommended technical standards for PGs. Prepaid Payment Instruments Prepaid Payment Instruments (PPIs) are stored-value instruments that facilitate the purchase of goods and services (including financial services). They may be issued as pre-paid cards or virtual wallets and may be issued by banks, authorised non-banking entities and/or under a co-branding arrangement between licensed and non-licensed entities. Under the revised Master Directions on Prepaid Payment Instruments issued by the RBI on 27 August 2021 (the “PPI Master Directions”), PPIs may be issued under one of the fol - lowing categories: • closed-system PPIs, for purchase of goods or services offered only by the PPI issuer (they do not require prior approval from the RBI); or • PPIs that require RBI approval/authorisation prior to issuance, which are classified under two types – small PPIs and full-KYC PPIs. Small PPIs are issued by banks and non-banks after obtaining minimum details of the PPI holder. They can be used only for purchasing goods and services. Fund transfers or cash withdrawals from such PPIs are not permitted. Small PPIs can be used at a group of clear - ly identified merchant locations/establishments that have a specific contract with the issuer (or contract through a payment aggregator/payment gateway) to accept the PPIs as payment instruments. Full-KYC PPIs are issued by banks and non-banks after completing KYC of the PPI holder. These PPIs can be used for the purchase of goods and services, fund transfers or cash withdrawals.
atively underbanked sectors such as micro, small and medium-sized enterprises (MSMEs) and retail clients. Digital lending is under the regulatory purview of the RBI. The RBI has embedded digital lending provisions within its credit facilities directions applicable to each category of regulated entity, establishing a compre - hensive regulatory framework for India’s digital lend - ing ecosystem (the “DL Guidelines”). The DL Guidelines apply to both REs and the lend - ing service providers or digital lending platforms that enter into partnership arrangements with REs to pro - vide digital lending products to consumers. The DL Guidelines prescribe guardrails in connection with the kinds of customer data that can be accessed and stored by lending service providers, the consent architecture that must be in place for the collection and storage of such customer data and detailed dis - closure requirements to protect customer interest and prevent mis-selling of credit products. The DL Guide - lines also provide for indirect regulation of lending ser - vice providers through regulated lending institutions. P2P lending platforms Online P2P lending platforms are governed by the RBI and offer loan facilitation services between lenders registered on the platform and prospective borrowers – ie, they constitute a regulated online marketplace for P2P lending. To offer such services, eligible entities are required to obtain registration with the RBI as an NBFC–P2P lending platform, subject to a few identi - fied exceptions. P2P platforms also came under sharp regulatory scru - tiny in the last year, with the RBI expressing concerns regarding some business models where P2P plat - forms performed quasi-lending and banking functions instead of acting as an intermediary. Cross-Border Payment Solutions and Money Remittance Products Cross-border payment solutions and other remittance products are governed by the RBI, and are available through a variety of routes in India, including the PA– Cross-Border, Money Transfer Service Scheme and an authorised dealer bank Category II licence.
Digital Lending Digital lenders
In India, banks and NBFCs alike have moved to digital platforms for credit products, particularly to cater to rel -
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