Licensing for payment sector can't be tick-box exercise: Gandhi

Mumbai: RBI's Deputy Governor R Gandhi today said granting licences to payment service providers cannot be a 'tick box exercise' as entities will be entrusted with money, and so fit and proper criterion is important. "There is an implied suggestion that this (payment) sector needs to be freed of licensing mechanism and once a set of criteria are fixed, any number of entities meeting those criteria should be allowed to function. We differ from this idea," Gandhi said at the launch of BharatQR, an inter-operable payment solution.

"Such a free entry may not be appropriate for payment industry. We must remember that the payment service provider is entrusted with money and therefore 'fit and proper' criterion is of utmost importance and consequently, free entry based on tick box exercise will not be right and it can pose a risky proposition to the system as a whole," he said. Gandhi said there is a misconception that non-bank entities are being discriminated as compared to the banking entities in the payment system arena. He clarified that RBI, as a payment system regulator, has opened up the space of non-bank entities and given them access to various payment systems.

"We have been opening up the space and allowing entry to non-bank entities. At the origination, in between originating bank and destination bank and at the receiving end, there is no restriction for a non-bank entity to be present," the Deputy Governor said. Gandhi quoted examples of Prepaid Payment Instrument (PPI) issuers, Bharat Bill Payment System (BBPS) operating units, Trade Receivables Discounting System (TReDS), White Label ATMs (WLAs) and payment aggregators where non-bank entities are operating. He said there has been some criticism over RBI not allowing non-bank entities to keep bank accounts. Many mobile phone companies do feel they can offer account-based payment service, he further said. "If you maintain a bank account, then you are a bank and you need a banking licence.

When you keep the money of the public in account, you are a financial entity taking deposits and you must be public trustworthy and so be regulated as a deposit taking financial entity," Gandhi said justifying RBI's stand on not allowing non-bank entities to keep bank accounts. Today, he launched the BharatQR, an inter-operable and low cost payment acceptance solution, developed by National Payments Corporation of India (NPCI), Mastercard, and Visa. With BharatQR, the consumers will not need to scan different quick response (QR) codes at the same merchant provided by the different payment networks. The merchants will only need to display one QR code at the storefront or through the acquiring bank’s mobile application.