12. Deployment of Money Collected
12.1 To ensure timely settlement, the non-bank PPI issuer shall invest the money collected against issuance of PPIs only as provided herein.
12.2 For the schemes operated by banks, the outstanding balance shall be part of the ‘net demand and time liabilities’ for the purpose of maintenance of reserve requirements. This position will be computed on the basis of the balances appearing in the books of the bank as on the date of reporting.
12.3 Non-bank PPI issuers are required to maintain their outstanding balance in an escrow account with any scheduled commercial bank. For the purpose of maintenance of the Escrow account, payment systems operated by non-bank entities for issuance of PPIs shall be deemed to be ‘designated payment systems’ under Section 23A of the PSS Act, 2007 (as amended in 2015).Maintenance of escrow balance shall be subject to the following conditions:-
(i) The escrow balance shall be maintained with only one scheduled commercial bank at any point of time.
(ii) In case there is a need to shift the escrow account from one bank to another, the same shall be effected in a time-bound manner without unduly impacting the payment cycle to the merchants. The migration shall be completed in the minimum possible time and with the prior approval of RBI.
(iii) The balance in the escrow account shall not, at the end of the day, be lower than the value of outstanding PPIs and payments due to merchants. While as far as possible PPI issuers shall ensure immediate credit of funds to escrow on issue, load / reload of PPIs to the PPI holders, under no circumstance such credit to escrow account shall be later than the close of business day (the day on which the PPI has been issued, loaded / reloaded). This shall be monitored by the non-bank PPI issuer on a daily basis and any shortfall shall be immediately reported to the respective Regional Office of DPSS, RBI.
(iv) Only the following debits and credits shall be permitted in the escrow account:
Credits
a. Payments received towards issue, load / reload of PPIs, including at agent locations.
b. Refunds received for failed / disputed / returned / cancelled transactions.
c. Payments received from sponsor bank towards settlement obligations from participation in interoperable payment systems, as permitted by RBI from time
to time.Debits
d. Payments to various merchants / service providers towards reimbursement of claims received from them.
e. Payment to sponsor bank for processing funds transfer instructions received from PPI holders as permitted by RBI from time to time.
f. Payments made to sponsor bank towards settlement obligations from participation in interoperable payment systems, as permitted by RBI from time to time.
g. Payment towards applicable Government taxes (received along with PPI sale / reload amount from the buyers).
h. Refunds towards cancellation of transactions in a PPI in case of PPIs loaded / reloaded erroneously or through fraudulent means (on establishment of erroneous transfer / fraud). The funds shall be credited back to the same source from where these were received. These funds are not to be forfeited till the disposal of the case.
i. Any other payment due to the PPI issuer in the normal course of operating the PPI business (for instance, service charges, forfeited amount, commissions, etc.).
j. Any other debit as directed by the regulator / courts / law enforcement agencies.Note:
(1) The payment towards service charges, commission and forfeited amount shall be at pre-determined rates / frequency. Such transfers shall only be effected to a designated bank account of the PPI issuer as indicated in the agreement with the bank where escrow account is maintained.
(2) All these provisions shall be part of Service Level Agreement that will be signed between the PPI issuer and the bank maintaining escrow account.
(v) The agreement between the issuer / operator and the bank maintaining escrow account shall include an exclusive clause enabling the bank to use the money in the escrow account only for making payment to the merchants / PPI holders.
(vi) Settlement of funds with merchants shall not be co-mingled with other business, if any, handled by the PPI issuer.
(vii) No interest shall be payable by the bank on such balances, except as indicated in paragraph 12.4 below.
(viii) PPI issuers shall be required to submit the list of merchants acquired by them to the
bank and update the same from time to time. The bank shall be required to ensure that payments are made only to eligible merchants / purposes. There shall be an exclusive clause in the agreement signed between the PPI issuer and bank maintaining escrow account towards usage of balance in escrow account only for the purposes mentioned above.
(ix) With the growing acceptance of PPIs in e-commerce payments, including in digital market places, the payment mechanism is often facilitated using the services of payment aggregators / payment gateways. In such a scenario, the emerging practice observed is that the PPI Issuer has the necessary agreements with the digital market place and / or
the payment aggregator / gateway rather than the individual merchants who are accepting the PPIs issued by the Issuer as a payment instrument. In view of the above, PPI issuers shall obtain an undertaking from the digital market place and / or payment aggregator / gateway that the payments made by the Issuers are used for onward payments to the respective merchants. Such undertaking shall be submitted by the Issuers to the bank maintaining the escrow account.
(x) A certificate (format enclosed Annex-5) signed by the auditor(s), shall be submitted by the authorised entities to the respective Regional Office of DPSS, RBI on a quarterly basis certifying that the entity has been maintaining adequate balance in the escrow account to cover the outstanding value of PPIs issued and payments due to merchants. The certificate shall be submitted within a fortnight from the end of the quarter to which it pertains. The entities shall also submit an annual certificate (Annex-5), signed by the auditor(s), coinciding with the accounting year of the entity to RBI.
(xi) Adequate records indicating the daily position of the value of instruments outstanding and payments due to merchants vis-à-vis balances maintained with the banks in the escrow accounts shall be made available for scrutiny to RBI or the bank where the account is maintained on demand.
12.4 As an exception to paragraph 12.3 (vii), the non-bank PPI issuer can enter into an agreement with the bank maintaining the escrow account, to transfer "core portion" of the amount, in the escrow account to a separate account on which interest is payable, subject to the following:-
a) The bank shall satisfy itself that the amount deposited represents the "core portion" after due verification of necessary documents.
b) The amount shall be linked to the escrow account, i.e. the amounts held in the interest bearing account shall be available to the bank, to meet payment requirements of the entity, in case of any shortfall in the escrow account.
c) This facility is permissible to entities who have been in business for at least one year (26 fortnights) and whose accounts have been duly audited for the full accounting year.
d) No loan is permissible against such deposits. Banks shall not issue any deposit receipts or mark any lien on the amount held in such form of deposits.
e) Core portion as calculated below will remain linked to the escrow account. The escrow balance and core portion maintained shall be clearly disclosed in the auditors’ certificates submitted to RBI on quarterly and annual basis.Note: For the purpose of these Directions, "Core Portion" shall be computed as under:-
Step 1: Compute lowest daily outstanding balance (LB) on a fortnightly (FN) basis, for one year (26 fortnights) from the preceding month.
Step 2: Calculate the average of the lowest fortnightly outstanding balances [(LB1 of FN1+
LB2 of FN2+ ........+ LB26 of FN26) divided by26].
Step 3: The average balance so computed represents the "Core Portion" eligible to earn interest.