The International Financial Services Centres Authority (IFSCA) announced the Payment Services Regulations, 2024, which were officially published in the gazette on January 30, 2024.
By facilitating these services from the International Financial Services Centre (IFSC), the regulations empower financial institutions within the IFSC to both offer and receive a broad spectrum of financial services.
These services enable the efficient transfer of funds between individuals, businesses, and other entities. the regulations provide an opportunity for Indian fintech companies aspiring to globalize their products.
They can establish IFSC as their operational base, from which they can extend their services to jurisdictions worldwide.
The regulations also support the process of reverse-flipping, which is beneficial for many Indian fintech companies that have holding companies in foreign jurisdictions and are involved in providing one or more of the payment services enabled by these regulations.
EXISTING LAW IN INDIA:
The Payment Service Providers (PSPs) operating in India fall under the regulatory purview of the RBI’s ‘Payment and Settlement Systems Act, 2007’.
Meanwhile, regulations for cross-border payments are governed by the recently introduced Payment Aggregators of Cross-Border Transactions (PA-CB) framework.
Gift City International Financial Services Centre (IFSC)
The introduction of IFSCA (Payment Services) Regulations 2024 has slightly altered the status quo by establishing an independent set of regulations for entities operating or intending to operate within the Gift City International Financial Services Centre (IFSC). This can be considered as a prudent step given the status of IFSC as a distinct international financial jurisdiction from the rest of India.
WHAT DOES THE FRAMEWORK ENTAIL?
The regulations are organized into eight chapters and seven schedules, reflecting a structure that aligns with international regulations governing payment services in jurisdictions such as Singapore, the United Kingdom, and the European Union.
These regulations establish a comprehensive framework for entities that offer the following payment services to obtain authorization from IFSCA:
1.Account issuance service (including e-money account issuance service) 2.E-money issuance service 3.Escrow service 4.Cross border money transfer service 5.Merchant acquisition
CONCLUSION:
The mechanism provides a structured framework for entities to seek authorization for various payment services.
It empowers financial institutions in IFSC to offer and receive a wide range of financial services and paves the way for Indian fintech entities to expand their global reach by utilizing IFSC as a base for offering their products to jurisdictions worldwide.
This move marks a significant step towards enhancing the scope of financial services in India and promoting the country as a global fintech hub.
