The Reserve Bank of India (RBI) has, vide notification dated 4 July 2022 (Notification), amended the M&A norms for non-bank payment system operators (PSOs) and introduced the requirement of obtaining RBI’s prior approval in case of takeover / acquisition of control of a non-bank PSO and sale / transfer of payment system activity of a non-bank PSO.

It is pertinent to note that prior to the Notification, there was no requirement of obtaining a prior approval from the RBI for any takeover or acquisition of control or change in management of a non-bank PPI issuer or a non-bank entity operating as payment aggregator.  However, an intimation was required to be filed with the RBI within 15 days with complete details. Prior approval of RBI was mandatory for assignment/transfer of the authorisation issued to a white label ATM operator.

As a result of the Notification, non-bank PSOs would now require prior approval of the RBI in the following cases:

  1. Takeover/acquisition of control, which may or may not result in change of management: In such case, the transferor non-bank PSO shall apply to RBI along with the required information about the proposed directors and complete details about the new shareholders.
  2. Sale/transfer of payment activity to an entity which is not authorised by RBI for undertaking similar activity: In such cases, while the seller entity shall apply to RBI for prior approval, the transferee entity shall approach to RBI for authorisation to carry on the payment activity. In addition to this, the seller entity shall be required to surrender its certificate of authorisation and the transferee entity shall be liable for complying with any regulatory/supervisory action taken by RBI for the period prior to the sale/transfer.

In the above-mentioned cases:

  1. The RBI shall endeavour to respond within 45 days after receipt of the complete details from both the entities.
  2. After obtaining RBI approval, a public notice shall be given at least 15 calendar days before effecting the change.  The public notice shall indicate the intention and reasons for such changes, particulars of the entities concerned, etc. The notice shall be published in at least one leading national and in one leading local vernacular newspaper (covering the place of the registered office of the respective entities).
  3. The seller/transferor non-bank PSO shall also be required to inform all the stakeholders (agents, bankers, customers, merchants, etc.) of the changes, at least 15 calendar days before effecting the change.

The Notification has also prescribed the requirement to file intimation to the RBI in the following cases:

  1. Change in management / directors of non-bank PSO: In such cases, an intimation would need to be filed along with complete details of the directors. Upon receipt of intimation, the RBI would examine the fit and proper status of the management/directors, and if required, may place suitable restrictions.
  2. Sale / Transfer of payment activity to an entity authorised for undertaking similar activity:  the entities shall be required to give a public notice at least 15 calendar days before the actual sale/transfer.  The public notice shall indicate the intention and reasons for such changes, particulars of the entities concerned, etc. The notice shall be published in at least one leading national and in one leading local vernacular newspaper (covering the place of the registered office of the respective entities). The seller/transferor non-bank PSO shall also be required to inform all the stakeholders (agents, bankers, customers, merchants, etc.) of the changes at least 15 calendar days before actual sale/transfer.

The Notification can be accessed at the following link:

https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12348&Mode=0