RBI: NASSCOM’s Feedback on Processing and Settlement of small value Export and Import related payments

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RBI: NASSCOM’s Feedback on Processing and Settlement of small value Export and Import related payments

Apurva Singh

@apurvasingh

April 21, 2022

Public Policy

543

On April 07, the RBI released draft guidelines on ‘Processing and Settlement of small value Export and Import related payments’ facilitated by Online Export-Import facilitators (OEIF guidelines) for feedback. The objective of these draft guidelines is to further simplify and rationalise the process for settlement of payment for export and import through e-commerce.

Currently, the facility of processing and settlement of import and export related remittances by entering into standing contract with Online Payment Gateway Service Providers (OPGSPs) with respect to export of goods and services as well as import of goods and software is governed by 2015 and 2013 guidelines on the same. We captured the broad contours of the draft OEIF guidelines in a previous blog here.

On the basis of industry feedback, we submitted our feedback to RBI. Overall, we welcome the consultative approach of RBI in building the OEIF guidelines. Specifically, the industry welcomes the proposal by RBI to increase the value of online import of goods and digital products to USD 3000 from USD 2000 and for export transactions of goods and digital products to USD 15000 from USD 10000.[i] We believe that this will be beneficial for the growth of small exporters such as medium and small enterprises, freelancers, women entrepreneurs, early-stage start-ups etc.

A summary of our feedback is as follows:

Export of services

Clause 4.1 of the OPGSP guidelines, 2015 read with the RBI’s earlier circular dated June 11, 2013, and November 16, 2010 explicitly allowed for export of services.[ii] However, clauses 3.8 and 5.1 of the draft OEIF guidelines are restricted to “export and import of goods and digital products through e-commerce”. The draft OEIF guidelines do not allow for export of ‘services’, and no reason has been provided for this exclusion.

Exclusion of export services will impact a plethora of small value services that are exported from India, such as, yoga classes, chef/cooking classes, accounting services, bookkeeping, website designing, online web services, consultancy, education etc.

Recommendation: We note that the OEIFs should, in line with the previous RBI’s circulars, be permitted to facilitate export of services in addition to export of goods and digital products. Therefore, clauses 3.8 and 5.1 of draft OEIF guidelines should be amended.

Applicability of KYC Master Directions on PAs and PGs

Clause 7.6 of draft OEIF guidelines require OEIFs to “complete and ensure proper due diligence and adherence to KYC/AML/CFT norms as stipulated in the Master Direction of KYC issued by Reserve Bank of India before on-boarding merchants, i.e., exporters from India as well as importers overseas and only bona fide transactions take place under this arrangement.”

In this regard, we note that RBI’s circular dated March 31, 2021 on Regulation of Payment Aggregators and Payment Gateways (PA/PG clarifications) exempts PAs from adherence to the RBI KYC Master Directions, if the merchant already has a bank account which is being used for transaction settlement.[iii]

In this regard, we note that the blanket application of the RBI’s KYC Master Directions to OEIFs ignores the clarificatory circular, as mentioned above. This will impact ease of doing business for merchants which may have to provide information for KYC multiple times, i.e., for PAs as well for banks leading to duplication of efforts. This will also impact OEIFs who are PAs and PGs, and therefore are currently exempted from the requirement of following the KYC process.

Recommendation: The PA/PG clarification mentioned above, which exempts PA/PGs to undertake KYC of merchants that already have a bank account which is being used for transaction settlement, should also apply to OEIFs. Accordingly, blanket application of the RBI’s Master Directions on KYC to OEIFs should not be made mandatory.

Requiring OEIFs to KYC overseas importers

Clause 7.6 requires OEIFs to undertake KYC for overseas importers according to RBI’s Master Directions on KYC. In this regard, we note that extending this to “overseas importers” is unfeasible, for the following reasons:

OEIFs are only facilitators of payment transactions, and not responsible for interacting with consumers and ensuring whether the consumer is already KYC-ed;
Overseas importers would be subjected to KYC requirements as applicable in their respective jurisdictions, for example, consumers are to be KYC-ed by their payment instruments providers, such as card companies, banks providing internet banking services etc. according to their respective laws; and
Instruments required for KYC according to RBI’s KYC Master Direction, i.e., Aadhaar, PAN etc. are specific to India and may not be possessed by overseas importers.

It should be noted that even the even the PA/PG guidelines and RBI’s Master Directions on KYC do not require KYC of overseas importers. Therefore, the proposed requirement by OEIFs to undertake KYC for overseas importers according to RBI’s Master Directions on KYC is unfeasible for compliance.

Recommendation: OEIFs should not be required to undertake KYC of overseas importers.

For more details, please refer to our submission which is attached herewith.

For any queries related to this submission, please contact Apurva Singh (apurva@nasscom.in), Garima Prakash (garima@nasscom.in) or Ashish Aggarwal (asaggarwal@nasscom.in).

[i] See, Reserve Bank of India, Clause 3(i) and 4(i), Processing and Settlement of Import and Export related payments facilitated by online payment gateway service providers (September, 2015), available at https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=10037&Mode=0.

[ii] As already notified vide A. P. (DIR Series) Circular No.109 dated June 11, 2013 and A.P. (DIR Series) Circular No. 17 dated November 16, 2010 referred to earlier:

(i) the facility shall only be available for export of goods and services (as permitted in the prevalent Foreign Trade Policy) of value not exceeding USD 10,000 (US Dollar ten thousand) per transaction.

[iii] See, Reserve Bank of India, Clause 4.2, Clarification issued by RBI on circular DPSS.CO.PD.No.1810/02.14.008/2019-20 dated March 17, 2020 (as updated from time to time) on “Guidelines on Regulation of Payment Aggregators (PAs) and Payment Gateways (PGs) (March, 2021), available at https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12050&Mode=0.

RBI OEIF Guidelines

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Apurva Singh