Differences between OPGSP and OEIF- RBI Guidelines

The e-commerce industry has overtaken traditional business and has become the new era means of doing business. From Book My Bai to department store aggregation to online home services aggregators like Housejoy, the online aggregation business has re-defined the service category. The simplicity of doing business on these platforms has aided the rise of e-commerce transactions on both a national and worldwide scale. To exercise regulatory control over such transactions, particularly cross-border transactions, the Reserve Bank of India (RBI) issued a set of guidelines to cover such e-commerce arrangements in its circular dated November 16, 2010, on “Processing and Settlement of Export Related Receipts Facilitated by Online Payment Gateways”. In accordance with these regulations, Authorised Dealer Category-l (AD Category-l) banks were only allowed to provide the option to repatriate export-related remittances by establishing ongoing contracts with OPGSPs for the export of goods and services.

The RBI has recently issued a circular dated September 24, 2015, on “Processing and settlement of import and export related payments facilitated by Online Payment Gateway Service Providers”2, which states that “it has been decided to permit AD Category-l banks to offer similar facility of payment for imports by entering into standing arrangements with the OPGSPs.”

Online Payment Gateway Service Providers (OPGSP)

Definition and characteristics

In the beginning of 2010, the Reserve Bank of India (RBI) released a regulatory framework titled ‘Processing and Settlement of Export Related Receipts Facilitated by Online Payment Gateways’ in response to the increasing magnitude of e-commerce activities within India. As per the stipulations outlined in these regulations, it is specified that solely the banks falling under the Authorised Dealer Category-l (AD Category-l) possess the authority to extend the opportunity for repatriating remittances associated with exports of goods and services. This is achieved through the establishment of standing agreements with online payment gateway service providers (OPGSPs).

In the latter part of 2015, the Reserve Bank of India (RBI) granted permission for the processing and settlement of import and export-related payments through online payment gateway service providers. This decision involved allowing AD Category-l banks to establish standing agreements with the OPGSPs in order to offer similar payment facilities for imports. The purpose of this action was to expand the range of regulatory coverage. The AD Category 1 banks serve as an intermediary between the OPGSP and the RBI, so facilitating a quasi-regulatory oversight of the OPGSP’s operations. 

At present, the OPGSP facility serves as the predominant mode of payment for over 300,000 Micro, Small, and Medium-Sized Enterprises (MSME) exporters across the country. In light of a worldwide economic recession and recent geopolitical tensions in Europe, it is noteworthy that India has emerged as a prominent player in the exportation of small-value e-commerce. This development can be attributed to the widespread availability of internet connectivity and mobile phones, even in the most distant regions of the country. Hence, the sector acknowledges the commendable efforts of the RBI in streamlining the management and resolution of import and export payment transactions. Nonetheless, it is imperative to undertake further measures to address the existing gaps and challenges.

In the preceding year, the Reserve Bank of India (RBI) issued preliminary guidelines pertaining to the Online Export-Import Facilitators (OEIF), which had the potential to supplant the existing Online Payment Gateway Service Providers (OPGSP) system.

Open-Ended Investment Funds (OEIF)

Definition and features

The drafted rules for the processing and settlement of small-value export and import-related payments received through Online Export-Import Facilitators (OEIFs) have been issued by the Reserve Bank of India (RBI). The Draft guidelines have been developed with the intention of substituting the current rules pertaining to Online Payment Gateway Service Providers (hereinafter referred to as “OPGSPs”). The objective of the proposed recommendations is to streamline and rationalize the financial settlement process for export and import transactions conducted through e-commerce channels.

The draft guidelines provide a definition for OEIFs, which are identified as payment aggregators or payment gateways facilitating online remittances for low-value exports and imports of commodities and digital items through e-commerce platforms. As per the preliminary guidelines, an OEIF that facilitates payments for import transactions functions as a payment aggregator and is mandated by the Reserve Bank of India (RBI) to obtain authorization under the Payment and Settlement Systems Act, 2007^[1] (referred to as the “PSS Act” hereafter).

The concept of OEIF standards was developed to cater to the community engaged in international trade through online channels, facilitating the export and import of goods and services to customers throughout the globe. India is a prominent market for service exports, boasting a thriving gig economy. It holds a significant share of 60 percent in the overall export volume for services, while also accounting for 40 percent in the export of products and commodities.

Moreover, in accordance with the drafted guidelines on ‘Processing and Settlement of minor value Export and Import related payments’ enabled by OEIFs, foreign businesses seeking to operate as OEIF are required to establish an office in India prior to implementing the contract with any Authorised Dealer (AD) bank to facilitate e-commerce.

Online Export and Import Facilitators (OEIFs), previously known as Online Payment Gateway Service Providers (OPGSPs), are entities that operate as Payment Aggregators (PA) or Payment Gateways (PG). Their primary function is to enable online transactions for the exchange of small-value items and digital assets in the context of e-commerce.

When it comes to export transactions, the OEIF will function as a Payment Gateway and will adhere to the fundamental technology-related recommendations.

What are the roles and responsibilities of OIEF under e-commerce?

• In order to ensure comprehensive documentation, it is imperative to establish a policy or agreement that clearly delineates the obligations, responsibilities, and entitlements of all parties involved in the contractual arrangement. The Reserve Bank of India (RBI) can be furnished with a duplicate copy through the Authorised Dealer (AD) bank.
• The objective is to develop a policy that effectively addresses and resolves payment-related issues and complaints in a timely manner.
• In order to ensure strict adherence to the instructions pertaining to the timetables for routing funds through Import/Export Collection Accounts, as well as allowed debits and credits.
• In order to establish a Reserve Fund in India that would serve as a means for providing reimbursements in the event of a dispute, certain measures need to be taken.
• In order to fulfill the necessary obligations and comply with the Know Your Customer (KYC), Anti-Money Laundering (AML), and Countering the Financing of Terrorism (CFT) regulations outlined in the Reserve Bank of India’s Master Direction of KYC, it is essential to conduct thorough due diligence. This applies specifically to the process of onboarding merchants, including exporters from India and importers from other nations. The objective of this arrangement is to ensure that only genuine transactions occur.
• In compliance with relevant regulatory obligations, invoices issued to importers in India must accurately itemize the expenses associated with taxes, insurance, goods, and delivery charges, among others.
• The Office of Economic and Investment Forecasting (OEIF) will determine the precise permissible return amount before making a purchase, adhering to both the refund policy of OEIF and/or the policies of the merchants that have been brought on board.
• In the event that the acquired things are found to be damaged or defective upon delivery, the Indian buyer will receive suitable reimbursement and compensation.
• Before the goods or digital products are delivered, it is imperative for the Overseas Exporter Indemnity Fund (OEIF) to ensure that the Indian buyer is protected from any potential legal responsibility that may arise as a result of these cross-border import transactions.

Analyzing the key features of RBI guidelines for e-commerce

• Requirements for OEIFs: All OEIFs are classified as Payment Aggregator (‘PA’) or Payment Gateway (‘PG’) entities, as follows:
  • Payment aggregators (PAs) that assist in import transactions are required to obtain authorization under the Payment and Settlement Systems Act (PSS Act).
  • Payment gateways (PGs) that facilitate export transactions are categorized as such and are obligated to adhere to the baseline technology recommendations outlined in the ‘Guidelines on Regulation of Payment Aggregators and Payment Gateways’. Owing to their categorization, these Ongoing Environmental Impact Factors (OEIFs) will be subjected to the necessary regulatory requirements as outlined in the PA/PG Guidelines.
• Permitted Accounts: The OEIFs will persist in managing export/import collection accounts in adherence to the established guidelines. In addition, it is now required for OEIFs that enable import transactions to establish and maintain a nodal account for the purpose of directing payments from the importer to the OEIF’s import collecting account. In order to receive export payments, authorized deposit-taking banks (AD banks) are mandated to establish a Nostro account or utilize an already existing Nostro account.
• Digital Products: While the current guidelines permit Online Payment Gateway Service Providers (OPGSPs) to offer payment services for imports of goods and software, as well as exports of goods and services, the proposed draft guidelines propose that Online Export Intermediary Facilitators (OEIFs) exclusively provide payment services for import/export transactions involving items and ‘digital products’. The draft Guidelines lack a clear definition for the term ‘digital products’ in question.’
• Limits for transactions: The import transaction limits have been increased to USD 3,000, up from the previous limit of USD 2,000. Similarly, the export transaction limits have been lifted to USD 15,000, an increase from the previous limit of USD 10,000.
• Increased Responsibilities of OEIF Entities: The draft Guidelines establish specific responsibilities for Online E-commerce Intermediary Firms (OEIFs). These include conducting thorough assessments of merchants that are brought on board by OEIFs, in compliance with the Reserve Bank of India’s Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. OEIFs are also required to ensure that Indian buyers receive appropriate compensation in cases where goods are damaged or defective. Additionally, OEIFs must have a policy or agreement in place that outlines the obligations, responsibilities, and rights of all parties involved in the OEIF arrangements. 
• Timeline for Credit of Funds: The Draft Guidelines outline the duration for crediting funds in import transactions to the overseas seller’s account from the date of receiving funds from the importer in India. Similarly, for export transactions, the funds will be credited to the AD bank’s Nostro account upon receipt from the overseas buyer, and to the exporter’s account in India from the date of receiving funds from the overseas buyer. The specific timeframe for these transactions will be determined by the agreement between the OEIF and the relevant entity.

Comparative Analysis of OPGSP and OEIF

The distinction between the two sets of guidelines for e-commerce has been discussed below:

On the basis of the Opening of the office:

1. OPGSP – Foreign entities to open liaison office to act as OPGSP, as mentioned under Para 2.2.
2. OEIF – Foreign entities to open an office to act as OEIF, as mentioned under Para 3.9.

On the basis of Maximum value

1. OPGSP: Imports: USD 2000, as mentioned under Para 3(i)
   Exports: USD 10000, as mentioned under Para 4(i)
2. OEIF: Imports: Goods and Digital products, as mentioned under Para 4.1
   Exports: Goods and Digital products, as mentioned under Para 5.1

On the basis of the Transaction involved

1. OPGSP: Imports: Goods and Software, as mentioned under Para 3(i)
   Exports: Goods and Services, as mentioned under Para 4(i)
2. OEIF: Imports: Goods and Software, as mentioned under Para 3(i)
   Exports: Goods and Services, as mentioned under Para 4(i)

On the basis of Import payments

1. OPGSP: Balances in Import Collection Account to be remitted to overseas exporter’s account within two days, as mentioned under Para 3(ii)]
2. OEIF: Payment is to be received from an importer in the Nodal account of OEIF and then remitted to the Import Collection Account, as mentioned under Para 4.3 & 4.4. Thereafter, to be credited to the overseas exporter’s account as per the period agreed b/w him and OEIF, as mentioned under Para 4.5.

On the basis of the Mode of collection from the Indian importer

1. OPGSP: Credit card, debit card, and net banking, as mentioned under Para 3(iv)
2. OEIF: Credit card, debit card, UPI, net banking, or any other online payment methods as specified in Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2016, as mentioned under Para 4.2

On the basis of Export payments

1. OPGSP: Funds to transfer from the Notional account of an exporter to the Nostro collection account, as mentioned under Para 4(ii). Thereafter, to be transferred to the Export Collection Account in India within seven days, as mentioned under Para 4(iii).
2. OEIF: Funds are to be credited to the Nostro Account within such period as decided by the Indian exporter and OEIF, as mentioned under Para 5.2. Thereafter, it is to be transferred to the Export Collection Account in India within a period as agreed up to 5 days, as mentioned under Para 5.3

On the basis of Permitted credits and debits – Imports

1. OPGSP: Export Collection Account, as mentioned under Para 4(iv) & (v):
   • payment to Indian exporters’ accounts
   • payment of commission
   • charge back to the overseas importer
   • repatriation from the NOSTRO collection accounts
2. OEIF: export Collection Account, as mentioned under Para 4(iv) & (v)
   • payment to Indian exporters’ accounts
   • payment of commission
   • charge back to the overseas importer
   • repatriation from the NOSTRO collection accounts

Conclusion

India has consistently demonstrated its leadership in the domain of services exports, exhibiting a sustained expansion in its market share over an extended period of time. The practice of remote employment, which has become more prevalent due to the epidemic, has contributed to the continued growth of the gig economy in the country. Consequently, a significant proportion of families and micro, small, and medium enterprises (MSMEs) rely on revenue generated from the exportation of services. There has been a recent advancement in the exportation of services with somewhat lower value, encompassing areas such as education, accountancy, online web services, and consultancy, as well as diverse training and programs aimed at enhancing life skills, among other domains. All of these industries exhibit substantial potential for expansion. In 2015, India accounted for 3.1 percent of the global services exports. This figure rose to 3.9 percent in 2021, and it is projected to continue increasing as India sets its sights on achieving $1 trillion in exports by the year 2027.

The rapid evolution and progression of technology, particularly in the realm of online payments, presents a significant risk of data and security breaches. The existence of regulations governing the subject matter has occasionally resulted in a convoluted process. The primary objective of the Draft OEIF standards is to streamline and rationalize the payment settlement process for export and import transactions conducted through e-commerce platforms. This entails modifying the current standards to achieve a more simplified and efficient procedure. Nevertheless, the Reserve Bank of India (RBI) will have to carefully manage the increased compliance burden and financial risk associated with the notional other entities in the Financial Sector (OEIFs) in consultation with relevant stakeholders. The inclusion of the services bucket within the legal framework for OEIFs, along with the establishment of equitable conditions for their operation, are crucial modifications that would contribute to enhanced regulation and governance.

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