INDIA Law and Practice Contributed by: Shilpa Mankar Ahluwalia, Himanshu Malhotra and Purva Anand, Shardul Amarchand Mangaldas & Co
5. Payment Processors 5.1 Payment Processors’ Use of Payment Rails
only unsecured plain vanilla loans are permit - ted. Such loans are also subject to maximum exposure limits on lenders sanctioning loans to borrowers through such platforms. The P2P lending platform itself is restricted from provid - ing any loans or granting credit support to loans disbursed on its platform. 4.4 Syndication of Fiat Currency Loans Syndication of loans is a common practice in India for funding large borrowing requirements, primarily by corporates. Syndication primarily involves distribution of credit exposure amongst a consortium of lending banks with a common security agent/trustee appointed to hold security for the benefit of the lending banks. The arrange - ment typically also involves the appointment of “lead bank” for administrative and decision- making purposes. The lending banks typically also enter into a security-sharing or inter-creditor arrangement, which sets out their respective rights and obli - gations and the approach to be followed in case of a default by the borrower and enforcement of security. The RBI has mandated information-sharing measures to be followed by banks while grant - ing loans under multiple banking/consortium arrangements. The key measures mandated by the RBI include obtaining declarations from the borrower of the credit facilities availed by them from other banks, and establishing a sys - tem of exchange of information with respect to the borrower’s credit facilities between banks (upon obtaining appropriate consent from the borrower).
Payment processors primarily rely on existing payment rails for processing and completing payment transactions. For example, payment processors such as payment aggregators use the existing payment rails such as card net - works (for card transactions), NEFT and RTGS (for online banking transactions), etc, to process payments. TPAPs for UPI transactions rely on the UPI (operated by the NPCI) for processing and completing UPI payment transactions. 5.2 Regulation of Cross-Border Payments and Remittances Cross-border payments and remittances are primarily regulated under the 1999 Foreign Exchange Management Act (FEMA) and the rules, regulations and circulars issued there - under. FEMA prescribes different regulations and compliance requirements, depending on the nature of transaction (ie, whether a capital account transaction or a current account trans - action) and whether remittances are inbound to India or outbound from India. Such transactions are undertaken by AD Banks, authorised under FEMA to deal in foreign exchange on behalf of their clients. For personal remittances inbound to India, resi - dents may use the facility to receive such pay - ments through money transfer operators. RBI-approved PA-CBs also facilitate cross-bor - der payments in exchange for goods and servic - es. Additionally, UPI global is the latest entrant in the cross-border payments space in India. (see 1.1 Evolution of the Fintech Market ).
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