New process of authorization and operations of Payment System introduced vide IFSCA (Payment and Settlement Systems) Regulations, 2024

On 14-10-2024, the International Financial Services Centres Authority (‘IFSCA’) notified the International Financial Services Centres Authority (Payment and Settlement Systems) Regulations, 2024. The provisions came into force on 17-10-2024.

Key Points:

1. Objective: to lay down the process of authorization and operations of Payment Systems in International Financial Services Centres.

2. Application for authorization for commencing or carrying on a Payment System:

   • Person desirous of commencing or carrying on a Payment System will have to apply for a grant of authorization.

   • The application will be accompanied by a non- refundable application fee of 1000 USD.

3. Grant of in- principle approval:

   • IFSCA will consider the application if it satisfies:

     • Need for the Proposed Payment System (‘PPS’) or the services proposed to be undertaken by it;

     • Technical standards / design of the PPS;

     • Terms and Conditions of PS including any security procedure;

     • Manner in which transfer of funds may be affected;

     • Procedure for netting payment instructions effecting the payment obligations;

     • Financial status/ experience of management and integrity of the application;

     • Interests of consumers;

     • Monetary and credit policies.

   • IFSCA can issue an “in- principle approval” after considering the application although this does not automatically entitle the applicant for authorization.

4. Grant of Authorization Certificate:

   • IFSCA can issue an authorization certificate to commence a Payment System and specify the date of authorization;

   • While granting authorization, IFSCA can impose additional conditions, and authorization will be granted if these conditions are met.

   • IFSCA can also ask the applicant to furnish a security deposit.

5. In case an application for exemption is rejected by the IFSCA, it has to communicate the same to the applicant within 90 days from the date of application.

6. Every System Provider will have to comply with the Principles for Financial Market Infrastructure issued by the Commitee on Payments and Market Infrastructure and International Organization of Securities Commissions.

7. Furnishing of accounts and Balance Sheet:

   • System Provider will have to furnish on the last date of the relevant year:

     • a copy of its audited balance sheet;

     • a copy of the profit and loss account;

     • a copy of Auditor’s report.

   • The above-mentioned should be furnished within 3 months from the date on which the System Provider’s annual accounts are closed.

8. Starting from 17-10-2024, the Payment and Settlement Systems Regulations, 2008 will not apply in the International Financial Service Centre’.