INDIA Law and Practice Contributed by: Shilpa Mankar Ahluwalia, Himanshu Malhotra and Purva Anand, Shardul Amarchand Mangaldas & Co
Digital Payments UPI payments
the RBI has also revoked authorisations and licences granted to the defaulting REs. Recently, the RBI restricted an RE from onboard - ing new customers and from carrying on any further banking operations whatsoever (except customer withdrawals), due to their failure to comply with KYC/AML requirements. It also restricted four NBFCs from sanctioning or dis - bursing loans, for charging usurious interest rates from retail borrowers and other unfair lend- ing practices. Industry players have recently expressed con - cerns that the stringent regulatory actions taken by the RBI will dampen market sentiment and raise investor apprehensions. 2. Fintech Business Models and Regulation in General 2.1 Predominant Business Models The various fintech business models or verti - cals that are currently predominant in India are, broadly: • digital payments; • digital lending; and • a host of intermediary services such as pay - ment aggregation, payment gateway services, credit analysis, post-disbursement services etc, that serve to create a seamless user experience. Products pertaining to other significant aspects of fintech, such as insurtech, regtech and wealth - tech are starting to scale in the Indian market.
UPI is a payments platform managed and oper - ated by NPCI, which enables real-time, instan - taneous, mobile-based bank-to-bank payments. It leverages India’s fast-growing mobile and tel - ecommunications infrastructure to offer easily accessible, low-cost and universal remittance facilities to users (also see 1.1 Evolution of the Fintech Market ). Prepaid Payment Instruments (PPIs) 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 (PPI Master Directions), PPIs may be issued under one of the following 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 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 hold - er. They can be used only for purchasing goods and services. Fund transfers or cash withdraw - als from such PPIs are not permitted. Small PPIs can be used at a group of clearly identified merchant locations/establishments which have a specific contract with the issuer (or contract through a payment aggregator/payment gate - way) to accept the PPIs as payment instruments.
301 CHAMBERS.COM
Powered by FlippingBook