Earlier this financial year, the Reserve Bank of India (“RBI”) vide its notification dated March 17, 2020 and with effect from April 1,2020 began regulating the activities of Payment Aggregators (“PAs”) and Payment Gateways (“PGs”) (“Regulation”). Our legal update on the foregoing may be accessed at : http://aplaw.in/now-regulated-payment-aggregators-and-payment-gateways/
The Regulation mandated that non-bank PAs shall maintain the amount collected by them in an escrow account with any scheduled commercial bank. Pursuant to the recent notification (DPSS.CO.PD.No.1810/02.14.008/2019-20) dated March 17, 2020, issued by the Reserve Bank of India, the Regulations have been modified and from hereinafter, PAs are permitted maintain an additional escrow account with a different scheduled commercial bank at the discretion of the PA (“Notification”).
Further the Notification, while its does not prohibit but discourages credit and debit from one escrow account to the other, where additional escrow account is maintained, provided the auditor’s certification clearly mentions such inter-escrow transfers.
The Regulation provide for quarterly filing of the auditors certificate with the RBI certifying the maintenance of the escrow account in accordance with the Regulation. Now, in accordance with the Notification in case, an additional escrow account is being maintained, it shall be ensured that balances in both accounts are considered for the above certification. This shall also be indicated in the certificate. The same auditor shall be employed to audit both escrow accounts.
Further, pursuant to the Notification, the “core portion” as defined in the Regulation, shall be calculated separately for each of the escrow accounts and will remain linked to the respective escrow account. The escrow balance and core portion maintained shall be clearly disclosed in the auditors’ certificates submitted to RBI on quarterly and annual basis.
The modifications made by the Notification in the Regulations are welcome as it aims to address concerns of the stakeholders with respect to diversification of risk and also to address concerns pertaining to business continuity.
