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24 Apr 2022

Online payment firms including Cashfree and MobiKwik have come under the scanner of the Reserve Bank of India (RBI), a report in the Economic Times said.  According to the report, these fintech companies face a possible rejection of their payment aggregator licence applications due to their links with crypto and gaming companies. 

Cashfree has faced tough questions regarding merchant partnerships for its payouts business, know-your-customer (KYC) norms, its net-worth criteria, and onboarding betting apps as clients, the report said.

Cashfree along with PayU, Delhi NCR based Asian Checkout often features as a payment gateway for online offshore casinos and betting apps. In March, G2G had sought a clarification from Cashfree on the use of its platform by illegal offshore casinos. Cashfree then responded that its platform does not support businesses that violate Indian law. 

“The regulator is clearly not okay with payment aggregators having dealings with cryptocurrency companies, or with gaming apps which have in the past been accused of being a conduit to launder money,” a person directly aware of the development was quoted by ET.

Also read: PP Poker managers under ED scanner

According to the 2020 payment aggregator framework, only firms approved by the RBI can acquire and offer payment services to merchants. The existing payment aggregators are required to achieve a net worth of ₹25 crores by March 31, 2023. The net worth of ₹25 crores shall be maintained at all times. 

The RBI has not provided any licences yet under the 2020 framework, but it has been quickly informing those companies whose applications have been rejected, people familiar with the matter were quoted by ET. 

At least 185 fintech firms had submitted proposals seeking payment aggregator licences. The applicants include big names like Tata group, Amazon, Reliance Industries, Dutch payments startup Adyen, Paytm, BharatPe, PhonePe, CC Avenue, Razorpay, Cred, Zomato, PayU, Worldline, Pine Labs and CAMSPAY,

Online skill gaming, which attracts millions of customers and involves large sums of money, is likely to be brought within the purview of the Prevention of Money Laundering Act (PMLA) in an attempt to thwart money laundering (ML) and terror financing (TL) via such activities. Earlier this month, Jayesh Rangan, the Principal Secretary of IT, Telanagana Government urged the gaming companies to adopt robust KYC mechanisms

Online gaming in many states is under scrutiny by state governments. Three High Courts namely Kerala, Madras, and Karnataka in recent times have held online gaming ban laws unconstitutional. The Madras and Karnataka High Court decisions are challenged before the Supreme Court

Dean Kuriakose, a congress member from Kerala on 1 April 2022 introduced The Online Gaming (Regulation) Bill, 2022 in the Lok Sabha as a Private Member's Bill. The bill introduced by Dean Kuriakose seeks to regulate the online gaming industry to prevent fraud and misuse. 

Update 1: Cashfree has denied the reports that it is under RBI scanner. "We would like to state that Cashfree Payments has not come under any scanner by RBI. Our interaction with the regulator has been positive. Cashfree Payments has zero exposure or relations with crypto exchanges,” a spokesperson for Cashfree said. 

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