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Procedure for Obtaining Online Payment Gateway License in India

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Procedure for Obtaining Online Payment Gateway License in India

Procedure for Obtaining Online Payment Gateway License in India

As we are all aware, the simplicity and flexibility that this platform offers have greatly enhanced the popularity of online shopping in India. A financial service offered by an e-commerce application service provider is referred to as a Payment Gateway. However, a Payment Gateway License from the Reserve Bank of India is required in order to launch a Payment Gateway service in India. This digital platform makes it easier to pay bills and recharge phones in addition to shopping. The same has evolved through time to include an online component. Furthermore, it should be emphasized that anytime someone makes an online purchase or pays a bill, they click the ‘Pay Now’ option and are taken to a new page. The page to which they are forwarded is called the Payment Gateway Website, and it is where purchases of products and services are paid for. In this article, we will discuss how to obtain an Online Payment Gateway License.

What is a Payment Gateway?

The word “Payment Gateway” refers to a middleman who mediates communications between banks and websites that facilitate transaction communication. In other words, it gathers data from the appropriate buyer bank, transmits the same transaction data to the receiving bank, and then records feedback regarding whether the aforementioned transaction has been properly allowed or rejected. An Online Payment Gateway acts as an intermediary to safely move your funds from your bank account to the merchant’s payment portal.

Essential requirements for Online Payment Gateway License 

The following are the essential requirement for Online Payment Gateway License:

  1. According to the provisions of the Companies Act 2013 or the Companies Act 1956[1], the aforementioned entity or company must be incorporated;
  2. At least two members.
  3. At least two directors.
  4. Address verification for the company.
  5. Business Plan for five years.
  6. PAN of the Company.
  7. The company’s current bank account information.
  8. Software Certifying Agency’s System Flow & Code Testing Report.
  9. The number of the Service Tax Registration.
  10. Adherence to the PCI DSS.

Capital Requirement for Online Payment Gateway License 

Only banks and non-bank finance companies that follow the Capital Adequacy criterion outlined from time to time by the Reserve Bank of India are permitted to provide prepaid payment instruments.

Foreign Exchange Prepaid Payment Instruments: These regulations do not apply to organizations that are permitted by FEMA to issue foreign exchange prepaid payment instruments. The use of such payment instruments must adhere to the Foreign Exchange Management (Current Account Transactions) Rules, 2000, as modified, and be restricted to transactions that are permitted for current accounts.

Documents needed for Online Payment Gateway License 

The following documents are the needed for Online Payment Gateway License:

  1. A duplicate of the Certificate of Incorporation (COI) that the Registrar of Companies (ROC) has granted to the Company.
  2. Information on the directors’ PAN cards.
  3. Address Directors’ Proof.
  4. The Directors’ Digital Signature Certificate (DSC).
  5. The Directors’ Director Identification Number (DIN).
  6. Proof of the registered office address.
  7. Detailed information on the company’s current bank account.
  8. Business plan for the organization’s upcoming five fiscal years.
  9. A software agency’s report on the testing code.

The procedure of the Online Payment Gateway License in India 

The following are the step to get an Online Payment Gateway License:

Step 1:

File an application in Form A in accordance with Section 5(1) of the PSS Act. The Chief General Manager of the Department of Payment and Settlement Systems at RBI’s Central Office in Mumbai, or any other office designated by RBI from time to time, must receive this application.

Step 2:

The RBI has the discretionary power to approve the licence for the payment gateway, as stated in Section 6 of the Act. The RBI has the power to carry out any investigation that it determines is necessary. The applicant’s information will be verified as accurate, and the qualifications of the other participants will be confirmed with the help of the questions.

Step 3:

 Before approving a payment gateway, the RBI will verify the following conditions:

  • It is suggested to carry out the requirement for producing a proposal for a payment system or services.
  • The proposed payment system’s structure or the technical requirements established for the payment system.
  • The parameters under which the proposed payment system would operate, including any security measures.
  • The suggested method for carrying out the transfer in the specified payment system;
  • The required method of receiving instructions that has an impact on payment system obligations.
  • The applicant’s moral character and financial situation.
  • The predetermined terms and conditions control how clients interact with payment providers.
  • The monetary and credit policy.

Step 4:

The RBI may provide the applicant an Authorization Certificate in Form “B” for the launch and operation of a payment system if it is satisfied that the applicant has complied with all of the requirements stated in Section 7(1). The date and conditions that the RBI provides for the authorization’s implementation are binding.

Step 5:

In accordance with Section 4 of the PSS Act, the RBI must process the authorization application as quickly as feasible, by six months after the application was submitted.

Conclusion 

Once you are aware of all the requirements and documents needed to obtain an Online Payment Gateway License in India, you can only finish the process. The Payment Gateway is connected to numerous banks, including HDFC, ICICI, and others. If the bank declines, the Online payment gateways connect with a few additional partner banks for the registration of merchant agents. Seek professional advice for Online Payment Gateway License. You can reach Bizadvisors.io for more information.

Read our article:How to Start Payment Bank in India: A Complete Guide

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