Google India said Google Pay does not need the approval to provide a financial transaction facility from RBI. Google India Digital Private Limited has told the Delhi High Court that the Google Pay app does not need permission from the Reserve Bank of India (RBI). Google India said that Google Pay is not a Payment System Operator (POS). It is a third party application provider. Google has said that the RBI-authorized PSO is the National Payments Corporation of India (NPCI), which is the owner and operator of the UPI network.
Understanding Digital Payment Services
Before delving into the specifics of Google Pay’s regulatory status, it’s important to understand the nature of digital payment services and how they are regulated in India. The RBI, as the country’s central bank, is responsible for regulating payment and settlement systems. However, not all digital payment services fall under the direct purview of the RBI.
RBI Approval for Payment System Operators
The RBI primarily requires payment system operators to obtain its approval. These operators include entities that are responsible for the operation of payment systems, such as the National Electronic Funds Transfer (NEFT), Real-Time Gross Settlement (RTGS), and the Unified Payments Interface (UPI). These systems are crucial for the functioning of the Indian financial system and are subject to strict regulatory oversight by the RBI.
NPCI authorizes third-party app providers
Google India has said in an affidavit in the High Court that NPCI authorizes banks providing payment services and third-party application (TPA) companies like Google Pay to transact on their network. In fact, in a PIL it was alleged that Google’s mobile payment app Google-Pay or G-Pay is providing a financial transaction facility without the necessary permission from the Reserve Bank of India.
No approval to provide financial transaction facility
The bench of Delhi High Court Chief Justice DN Patel and Justice Prateek Jalan will next hear the matter on August 31. In fact, the petitioner had requested to be given time to reply to Google’s affidavit. Petitioner Economist Abhijeet Mishra has claimed that G-Pay is acting as a payment system provider in violation of the rules. It does not have the necessary permission to provide a financial transaction facility from the central bank of India.
Google Pay adheres to the regulatory framework established by the RBI for digital payment applications. It complies with the Know Your Customer (KYC) norms and Anti-Money Laundering (AML) regulations to ensure the safety and security of user transactions. These measures are essential for mitigating risks associated with digital transactions.
Google Pay’s Role
Google Pay, on the other hand, operates as a third-party application that leverages the UPI infrastructure to facilitate transactions. It does not function as an independent payment system operator. Instead, it acts as an interface between users and their bank accounts, enabling them to send and receive money, pay bills, and make purchases seamlessly. Google Pay does not handle the settlement of transactions; it relies on the existing banking infrastructure and partners with authorized banks.
Google-Pay is not included in NPCI list
Mishra argued that G-Pay’s name is not even in the NPCI list of payment system providers released on 20 March 2019. Advocate Himanshu Vij, appearing on behalf of Google, argued that he works under the rules of NPCI. Complies with its guidelines and related laws. RBI has also said that Google-Pay is a third-party app provider. He does not run any payment system. Therefore, it is not a violation of the Payment and Settlement Systems Act 2007.
Clarification from Google India
Google India has made it clear that Google Pay does not require RBI approval to offer its services. It operates as a technology service provider, and its activities are well within the regulatory framework defined by the RBI. Google Pay has collaborated with several banks to ensure the smooth transfer of funds between users’ accounts, and it acts as a secure intermediary in these transactions.