With the stated objective of simplifying and rationalising the payment settlement process for import/ export through e-commerce, on April 7, 2022, the Reserve Bank of India (“RBI”) released the draft guidelines on ‘Processing and Settlement of Small Value Export and Import related payments facilitated by Online Export-Import Facilitators’ (“OEIFs”) (“Draft Guidelines”). The Draft Guidelines are intended to replace the existing guidelines for online payment gateway service providers (“OPGSPs”) dated September 24, 2015 (“Existing Guidelines”).

Key Highlights of the Draft Guidelines

• Requirements for OEIFs: All OEIFs are categorised either as payment aggregator (“PA”) or payment gateway (“PG”) entities viz. (a) OEIFs facilitating import transactions would be a PA and be required to obtain authorisation under the Payment System and Settlement Act, 2007 (“PSSA”); and (b) OEIFs facilitating export transactions would be a PG and be required to comply with the baseline technology recommendations under the ‘Guidelines on Regulation of Payment Aggregators and Payment Gateways’ dated March 17, 2020 (“PA/ PG Guidelines”). By implication, such OEIFs, basis their categorisation, will be subject to relevant compliances in accordance with the PA/ PG Guidelines.
• Permitted Accounts: OEIFs will continue to maintain the export/ import collection accounts as currently envisaged in terms of the Existing Guidelines. Additionally, OEIF facilitating import transactions will now also be required to maintain a nodal account to route funds from the importer to the OEIF’s import collection account. AD banks will be required to open a Nostro account or use their existing Nostro account for receipt of export payments.
• Digital Products: Whilst the Existing Guidelines permit OPGSPs to provide payment services for import of goods and software and export of goods and services, the Draft Guidelines envisage the provision of payment services by the OEIFs only for import/ export transactions involving goods and ‘digital products’ – the Draft Guidelines do not specifically define such ‘digital products’.
• Limits for Transactions: Transaction limits for import transactions have been increased to USD 3,000 (from the erstwhile limit of USD 2,000) and for export transactions have been increased to USD 15,000 (from the erstwhile limit of USD 10,000).
• Increased Responsibilities of OEIF Entities: The Draft Guidelines prescribe specific obligations for OEIFs, including inter alia, undertaking due diligence of merchants onboarded by OEIFs per the RBI prescribed KYC/ AML norms, ensuring that Indian buyers are appropriately compensated in case of damaged/ defective goods, having a policy/ agreement in place disclosing the duties/ responsibilities/ rights of various stakeholders under the OEIF arrangements, and having a policy for resolution of payment related disputes, etc.
• Timelines for Credit of Funds: To provide flexibility, the Draft Guidelines specify that the total time taken to credit the funds (a) in case of import transactions, into overseas seller’s account from the date of receipt of funds from the importer in India; and (b) in case of export transaction, (i) into the AD bank’s Nostro account once the funds are received from the overseas buyer and (ii) into exporter’s account in India from the date of receipt of funds from the overseas buyer, will be as per the agreement between the OEIF and the respective entity (overseas seller/ exporter in India). However, the timeline within which the funds must be credited from the AD bank’s Nostro account into the Indian exporter’s account has been revised to 5 days (as opposed to 7 days under the Existing Guidelines).

Analysing the New Regime proposed under the Draft Guidelines

Whilst the intent of the RBI has been to further streamline the OPGSP regime for small value digital payments in relation to import/ export transactions through e-commerce and protect the interest on Indian stakeholders, certain stipulations under the Draft Guidelines subject the OEIF entities to a more onerous regime as opposed to the erstwhile OPGSP regime. Some examples of this include mandatory authorisation under the PSSA for OEIFs facilitating imports related payment, complying with RBI KYC norms and ensuring adequate compensation for Indian buyers in certain scenarios. This may not only result in increase in certain indirect compliances applicable to PA entities but may also pose practical challenges for the OEIF entities. For example, it is uncertain how OEIFs will undertake due diligence for overseas merchants in terms of the RBI prescribed KYC norms.

Further, the Draft Guidelines also create conflicting regulatory positions viz. it is presently not mandatory for PGs to comply with the baseline technology recommendations under the PA/ PG Guidelines, though the Draft Guidelines seem to indicate that such compliance will be mandatory for OEIFs facilitating export transactions related payments. Further clarity will be required on these aspects in the final framework.

Separately, the scope of ‘digital products’ has not been defined by the RBI and whilst the Draft Guidelines refer to the foreign trade policy, no express guidance is available under this policy as well. This leads to an interpretational issue with respect to scope of ‘digital products’, including whether the same can be extended to software, services/ digital services and digital products like crypto-products, non-fungible tokens, etc. Specificity on these aspects in the final framework would be critical to ensure that there are no interpretational challenges.

Whilst the proposed Draft Guidelines have gathered a lot of attention on account of the abovementioned key changes, this framework is still in a draft stage and was open for public comments till April 24, 2022. Relevant stakeholders will have to wait for the final framework to ascertain the actual impact on their business models.