The RBI has asked PayU India to reapply for the licence within three months of receiving the central bank’s response to its initial application, the sources added.
PayU India’s complex corporate structure was one of the reasons the RBI asked it to reapply, another source said.
As a result, PayU India has stopped onboarding new merchants on its website.
“We are currently not accepting new applications. Our sales team will get in touch with you shortly,” read the disclaimer on PayU India’s merchant onboarding page.
A PayU spokesperson told ET,” We have received feedback from RBI on our PA application. We will work with them over the next 120 days to address some aspects and resubmit our application. One of the key aspects is the simplification of our corporate structure and we are already progressing quite well with some suggested solutions.”
Discover the stories of your interest
The spokesperson added that the development would have “no impact to its existing online merchants to whom services will continue as usual”.“Other businesses of PayU Payments including offline and BBPS (Bharat Bill Pay System) are not impacted and can continue as usual. New merchants can be onboarded,” said a PayU spokesperson in reply to ET’s queries.
The RBI’s decision to return PayU India’s application comes about two months after the regulator returned the PA licence application of Paytm last November and asked the company to reapply.
In a stock exchange filing, One97 Communications, which operates Paytm, said the central bank directed it to “seek necessary approval for past downward investment from the company into Paytm Payments Services Ltd (PPSL) to comply with FDI guidelines”.
Payment gateways pause onboarding
In December, the RBI asked several payment gateway firms including Razorpay – which had received the regulator’s in-principle nod for a PA licence – to stop onboarding new merchants.
The RBI has also asked payment services provider Cashfree to stop self-onboarding services for its new merchants and step up checks, ET reported on December 16, citing sources.
According to people aware of the matter, the central bank decision to pause merchant additions for these gateways was linked to their PA licences.
Entities that apply for a PA licence must submit to a system audit, which includes a cybersecurity audit. In addition, firms that have received RBI’s nod for a PA licence must shift from using nodal accounts to escrow accounts.
(Illustration by Rahul Awasthi)
