August 2024

RBI

NPCI Introduces UPI Circle To Allow Delegated Payments

In a significant move to further enhance the inclusivity and utility of the Unified Payments Interface (UPI), the National Payments Corporation of India (NPCI) has introduced a groundbreaking feature known as “UPI Circle.” This initiative is designed to address the needs of users who remain dependent on cash for their daily transactions due to their inability to manage finances through their bank accounts. The UPI Circle was endorsed during the UPI Steering Committee meeting on August 3, 2023, marking a new chapter in the evolution of digital payments in India.

Why The Need For UPI Circle?

While UPI has already established itself as the preferred mode of payment for millions of users by offering a seamless and secure digital payment experience, there remains a segment of the population that continues to rely on cash. These users often face barriers in managing their finances through traditional banking channels, which hinders their ability to fully participate in the digital economy. UPI Circle aims to bridge this gap by allowing primary users to delegate payment responsibilities to trusted secondary users.

How Does UPI Circle Work?

UPI Circle is a feature that enables a primary UPI user to authorize a trusted secondary user to perform transactions on their behalf. This delegation can be done either partially or fully, depending on the needs and preferences of the primary user. The introduction of UPI Circle caters to individuals such as the elderly, differently-abled, or those without the ability to manage their finances independently.

Full Delegation allows the primary user to grant a secondary user the authority to initiate and complete transactions within predefined spending limits. For full delegation, members must enforce a maximum monthly limit of INR 15,000 per delegation and a per-transaction limit of INR 5,000. This feature is particularly useful for individuals who need someone else to manage their day-to-day financial transactions.

Partial Delegation offers an additional layer of control, where the primary user permits the secondary user to initiate payment requests. However, the final authorization of the transaction requires the primary user’s UPI PIN, ensuring that the primary user retains ultimate control over their finances. Existing UPI limits shall be applicable in case of partial delegation.

UPI Circle Security And User Experience Enhancements

NPCI has emphasized the importance of security and user experience in the rollout of UPI Circle. To ensure the safety of delegated transactions, several guidelines and protocols have been established:

  • Independent User Journeys: UPI apps and Payment Service Providers (PSPs) are required to offer distinct user journeys for primary and secondary users. This ensures that both users can choose their preferred UPI apps without any restrictions.
  • Mandatory Security Protocols: Secondary users must authenticate their identity using app passcodes or biometric methods such as fingerprint or face recognition before initiating any transaction. This measure is crucial to prevent unauthorized access and maintain the integrity of the UPI system.
  • Seamless Linking Process: The primary user can link a secondary user by scanning a QR code or entering a UPI ID, followed by selecting the contact number from their list. In later phases, manual entry of mobile numbers for linking will be restricted to enhance security.
  • Delegation Limits: A primary user can delegate up to five secondary users, while a secondary user can accept delegation from only one primary user. This restriction helps manage and monitor the flow of transactions within a controlled environment.

UPI Circle Operational Guidelines And Compliance

To ensure the smooth operation and integration of UPI Circle, NPCI has set forth several operational guidelines:

  • Cooling Period and Transaction Limits: A cooling period of 24 hours is imposed after the successful linking of a primary and secondary user. During this period, a daily transaction limit of INR 5,000 is enforced for both full and partial delegations to mitigate potential risks.
  • Visibility and Control: Primary users are granted full visibility of transactions performed by secondary users, both on their UPI app and bank account statements. This transparency is vital for monitoring and managing delegated transactions.
  • Compliance with RBI Guidelines: All members involved in the UPI ecosystem must adhere to the Reserve Bank of India (RBI) guidelines on the Harmonization of Turn Around Time (TAT) and customer compensation for failed transactions. These guidelines ensure that users are compensated promptly in case of transaction failures.
  • Online Dispute Resolution (ODR): ODR functionality will be available for all UPI transactions under the UPI Circle, providing users with a streamlined process for resolving any disputes that may arise.
  • Reconciliation and Settlement: The reconciliation process for UPI Circle transactions will follow existing UPI guidelines. A new purpose code in the UPI raw file and an additional line item in the Net Settlement Report will be introduced to identify and settle UPI Circle transactions accurately. An additional raw file containing details of secondary users will also be provided, which will be shared with the primary PSP, secondary PSP, and remitter bank.

Conclusion

The introduction of UPI Circle by NPCI represents a significant advancement in the UPI ecosystem, particularly in its quest to include users who have been traditionally underserved by digital financial services. By enabling the delegation of payment responsibilities, UPI Circle not only empowers users who are unable to manage their own accounts but also enhances the overall security and functionality of UPI transactions. As this feature rolls out, it is expected to further increase UPI adoption across diverse user segments, reinforcing UPI’s role as the backbone of India’s digital payments landscape.

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FAQs Around UPI Circle

To link a secondary user, the primary user must first scan a QR code or enter the UPI ID, followed by selecting the contact number from their contact list. In a later phase, the primary user will be able to link a secondary user solely by selecting the contact number from the contact list, with manual entry of mobile numbers being restricted

The Unified Payments Interface (UPI) is owned and operated by the National Payments Corporation of India (NPCI). NPCI is a not-for-profit organization established by the Reserve Bank of India (RBI) and the Indian Banks’ Association (IBA).

Regular UPI transactions have a daily limit of ₹1 lakh. Withdrawals from ATMs using UPI apps are capped at ₹10,000 per day. Additionally, bank UPI apps permit up to 20 transactions per day.

Yes. UPI can be done without the internet. You have to dial *99# on your phone from the registered mobile number; the same number should be linked to your bank account. By following the steps that will be shown on your screen, you can easily use UPI offline.

By Abhinandan, ago
Payment Aggregators vs Payment Gateway: Key Differences

Payment Aggregators vs Payment Gateway: Key Differences

Introduction

Businesses are often faced with the challenge of selecting the right solution to facilitate seamless transactions. Two common options that often come into consideration are payment gateways and payment aggregators. Although these terms are sometimes used interchangeably, they represent distinct entities with unique functionalities, advantages, and use cases. This blog aims to demystify the differences between payment aggregators and payment gateways, helping you make an informed decision for your business.

What Is A Payment Gateway?

A Payment Gateway is a technology that allows merchants to process transactions through their website or application. It acts as a bridge between the customer’s bank and the merchant’s bank, securely transmitting payment information to facilitate the transaction.

Key Functions Of A Payment Gateway

  • Transaction Authorization: It verifies the customer’s payment details and ensures that there are sufficient funds to complete the transaction.
  • Data Encryption: Payment gateways encrypt sensitive data, such as credit card details, to protect it from cyber threats.
  • Transaction Processing: It communicates with the customer’s bank to transfer the payment to the merchant’s account.
  • Settlement: Funds are eventually settled into the merchant’s account, typically after a few business days.

Types Of Payment Gateways

Payment gateways are generally categorized based on their deployment method and the range of services they offer:

  1. Hosted Payment Gateways:
    • Example: UPI Payments Standard
    • Features: Redirect customers to a payment gateway’s page for payment processing, offering simplicity and security but at the cost of brand consistency.
  2. Self-Hosted Payment Gateways:
    • Example: Stripe, Braintree
    • Features: Payment data is collected on the merchant’s site before being sent to the gateway, allowing for more control but requiring greater security compliance.
  3. API/Non-Hosted Payment Gateways:
    • Example: Authorize.net
    • Features: Offer seamless integration via APIs, allowing the merchant to control the payment experience fully, suitable for advanced e-commerce sites.
  4. Local Bank Integration Gateways:
    • Example: CCAvenue (in India)
    • Features: Integrates directly with local banks to offer localized payment options, beneficial for businesses targeting specific regions.

How Payment Gateways Work

  1. Transaction Initialization: When a customer makes a purchase, the payment gateway encrypts and forwards the payment details to the acquiring bank.
  2. Authorization Request: The acquiring bank forwards the transaction request to the card networks (e.g., Visa, MasterCard) for authorization from the issuing bank.
  3. Authorization Response: The issuing bank approves or declines the transaction, and the response is sent back through the card network to the acquiring bank, and then to the payment gateway.
  4. Transaction Completion: If approved, the transaction is processed, and the payment is transferred to the merchant’s account.

What Is A Payment Aggregator?

A payment aggregator, on the other hand, is a service provider that allows merchants to accept payments without the need for a separate merchant account. Instead of setting up their own merchant account, businesses can use the aggregator’s account to process transactions.

Key Functions Of A Payment Aggregator

  • Onboarding and Merchant Management: Payment aggregators simplify the onboarding process for merchants, allowing them to accept payments without needing individual merchant accounts with banks.

  • Transaction Processing: They handle the collection of payments from various sources (credit cards, wallets, UPI, etc.) and channel them to the merchant.

  • Fund Settlement: Aggregators manage the settlement of funds, ensuring the merchant receives payments after deducting any fees.

  • Risk Management: They provide fraud detection, chargeback management, and ensure compliance with regulatory standards.

  • Multi-Channel Integration: Payment aggregators offer a unified platform to integrate multiple payment methods, streamlining the payment process for both merchants and customers.

Types Of Payment Aggregators

Payment aggregators are categorized based on the services they provide and the payment methods they support:

  1. Full-Service Payment Aggregators:
    • Example: Razorpay, Stripe
    • Features: Offer a comprehensive suite of payment methods including credit/debit cards, UPI, wallets, and more. They handle the entire payment process, from transaction initiation to settlement.
  2. Niche Payment Aggregators:
    • Example: PayPal
    • Features: Focus on specific payment methods or regions. They might specialize in cross-border payments, peer-to-peer transfers, or particular industries.
  3. Mobile Payment Aggregators:
    • Example: Google Pay, Paytm
    • Features: Specialize in mobile payments, often integrating with mobile wallets and offering QR code-based payments.

How Payment Aggregators Work

  1. Merchant Onboarding: Payment aggregators handle the onboarding process, allowing businesses to start accepting payments without a direct relationship with banks.
  2. Transaction Processing: The aggregator collects payments from various payment methods and channels them to the merchant’s account.
  3. Settlement: Aggregators manage the settlement process, transferring the funds to the merchant’s account after deducting fees.
  4. Risk Management: They provide fraud detection, chargeback management, and compliance services.

Payment Gateway vs Payment Aggregator: Key Differences

Feature

Payment Aggregator

Payment Gateway

Merchant Relationship

Merchants use the aggregator’s bank relationships.

Merchants must have their own acquiring bank relationship.

Integration

Single integration for multiple payment methods.

May require separate integrations for each payment method.

Risk Management

Aggregator handles fraud detection, chargebacks, and compliance.

Gateway handles secure data transmission but not chargebacks.

Settlement

Aggregator manages fund settlements to the merchant.

Settlement is managed by the merchant’s bank.

Setup Complexity

Easier to set up, with less technical complexity.

Requires more setup, especially for security and compliance.

Control

Less control over the payment process.

More control, including custom payment experiences.

When To Choose A Payment Gateway

  1. Established Businesses: If your business is well-established with a high volume of transactions, a payment gateway might be more cost-effective in the long run.
  2. Customization Needs: Businesses that require a high degree of control over their payment process, such as custom checkout pages or specific fraud prevention measures, will benefit from a payment gateway.
  3. Direct Merchant Account: If you prefer to have direct control over your merchant account, a payment gateway is the better choice.

When To Choose A Payment Aggregator

  1. Startups and SMEs: If you’re just starting out or running a small to medium-sized enterprise, a payment aggregator offers an easier and quicker setup.
  2. Low Transaction Volume: For businesses with lower transaction volumes, the simplicity and flexibility of a payment aggregator are advantageous despite the higher per-transaction fees.
  3. Wide Range of Payment Options: If you want to offer customers a variety of payment methods without managing multiple integrations, a payment aggregator is ideal.

Conclusion

Choosing between a payment gateway and a payment aggregator depends on your business’s size, needs, and future growth plans. Payment gateways offer more control and potentially lower costs for high-volume businesses, while payment aggregators provide a more straightforward and flexible solution for smaller businesses or those looking to get started quickly.

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FAQs Around Payment Gateways and Payment Aggregators

A payment aggregator allows merchants to accept payments without needing a direct merchant account with a bank. It manages various payment methods and consolidates them under one platform.

A payment aggregator allows merchants to accept payments without needing a direct merchant account with a bank. It manages various payment methods and consolidates them under one platform.

A payment gateway focuses on securely processing payments, while a payment aggregator handles the entire payment process, including onboarding, transaction processing, and settlement.

Not necessarily. Small businesses often opt for a payment aggregator for simplicity, while larger businesses might prefer the control offered by a payment gateway.

Payment gateways typically charge setup fees and transaction fees, while payment aggregators might only charge transaction fees, often at a slightly higher rate due to the convenience provided.

It depends on your business needs. If you need simplicity and a one-stop solution, a payment aggregator is ideal. If you require more control and customization, a payment gateway might be better.

Payment aggregators collect funds from customers and settle them into the merchant’s account after deducting any fees. This process typically happens on a scheduled basis (e.g., daily or weekly).

Yes, businesses can start with a payment aggregator for simplicity and later switch to a payment gateway as they scale and require more control over their payment processes.

Payment aggregators collect funds from customers and settle them into the merchant’s account after deducting any fees. This process typically happens on a scheduled basis (e.g., daily or weekly).

Yes, both payment aggregators and gateways comply with global payment regulations, such as PCI DSS, to ensure secure processing and protect customer data.

By Siddharth, ago
Digital Merchant Onboarding in India

Digital Merchant Onboarding

Introduction

Digital Merchant Onboarding refers to the process of using digital tools and platforms to register, integrate, and enable merchants to transact on a business’s platform electronically. This process typically involves gathering necessary merchant information, verifying identities, and setting up transaction capabilities, all executed digitally. In India, with its rapidly expanding digital infrastructure and government initiatives like Digital India, the relevance of efficient digital onboarding systems cannot be overstated.

Core Components of Digital Merchant Onboarding

1. Identity Verification and KYC (Know Your Customer)

2. Risk Assessment and Due Diligence

  • Purpose: To assess the potential risk the merchant might pose to the platform.
  • Process: Includes evaluating the merchant’s business model, financial health, creditworthiness, and transaction history. High-risk merchants might require additional scrutiny or higher levels of monitoring.
  • Outcome: Determines the level of oversight needed for each merchant and helps set appropriate transaction limits.

3. Compliance and Regulatory Checks

  • Purpose: To ensure the merchant complies with relevant laws and industry regulations.
  • Process: Involves checking against anti-money laundering (AML) lists, and sanction lists, and ensuring compliance with PCI DSS (Payment Card Industry Data Security Standard) if the merchant will be handling card payments.
  • Tools: Automated compliance checks are often integrated into the onboarding system to streamline this process.

4. Bank Account and Payment Gateway Integration

  • Purpose: To enable the merchant to receive payments and process transactions.
  • Process: Involves verifying the merchant’s bank account details and setting up payment gateways that will be used for processing transactions. This may include integration with various payment methods like credit cards, e-wallets, and bank transfers.
  • Security: Ensures that the payment infrastructure is secure and compliant with relevant financial regulations.

5. Contract Signing and Agreement

  • Purpose: To formalize the relationship between the platform and the merchant.
  • Process: The merchant reviews and signs the terms and conditions, service agreements, and other legal documents. This can be done digitally through e-signature tools.
  • Outcome: Establishes the legal framework for the partnership, outlining the responsibilities and expectations for both parties.

6. Platform Training and Support

  • Purpose: To ensure the merchant can effectively use the platform.
  • Process: Providing tutorials, guides, and training sessions to help merchants understand how to use the platform’s features, manage their accounts, and process transactions.
  • Support: Ongoing customer support is critical, especially during the initial phase, to help merchants resolve any issues quickly.

7. Testing and Go-Live

  • Purpose: To ensure that all systems are functioning correctly before the merchant starts transacting.
  • Process: Involves conducting test transactions to check the integration of payment gateways, security protocols, and the overall user experience.
  • Go-Live: Once testing is successful, the merchant is given the green light to go live and start processing real transactions.

8. Monitoring and Continuous Review

  • Purpose: To ensure ongoing compliance and detect any irregularities in the merchant’s transactions.
  • Process: Continuous monitoring of transactions for signs of fraud or suspicious activity, periodic reviews of the merchant’s performance, and updating KYC information as needed.
  • Tools: Automated monitoring systems that use AI and machine learning to flag unusual activity.

Technological Advancements In Digital Onboarding

Technological advancements have significantly transformed digital onboarding processes, making them faster, more secure, and more user-friendly. Here are some of the key technological developments that are driving innovation in digital onboarding:

1. Artificial Intelligence (AI) and Machine Learning (ML)

  • Enhanced Data Processing: AI and ML algorithms can quickly analyze and process vast amounts of data, improving the accuracy and speed of identity verification. These technologies can automatically flag suspicious activities, predict risks, and offer personalized onboarding experiences based on customer data.
  • Fraud Detection: AI-driven systems can detect patterns and anomalies that might indicate fraud, reducing the likelihood of fraudulent accounts being onboarded. Machine learning models continuously improve by learning from new data, enhancing their ability to prevent fraud over time.

2. Biometric Authentication

  • Fingerprint Scanning and Facial Recognition: Biometric technologies like fingerprint scanning, facial recognition, and iris scanning are now commonly used in digital onboarding to verify the identity of users securely and efficiently. These methods are more difficult to forge than traditional ID documents and provide an additional layer of security.
  • Liveness Detection: This technology ensures that the biometric data being presented is from a live person and not a spoofed or pre-recorded image, further enhancing security.

3. Blockchain Technology

  • Decentralized Verification: Blockchain can be used to create a decentralized, immutable record of a user’s identity, which can be accessed by multiple parties securely. This reduces the need for repeated verification processes and can streamline onboarding across different platforms and services.
  • Smart Contracts: Blockchain-based smart contracts can automate the compliance and agreement processes during onboarding, ensuring that all terms are met before a service is activated.

4. Robotic Process Automation (RPA)

  • Process Automation: RPA is used to automate repetitive tasks involved in onboarding, such as data entry, document verification, and compliance checks. This reduces the manual workload, minimizes errors, and speeds up the onboarding process.
  • Scalability: RPA enables businesses to handle large volumes of onboarding requests simultaneously without compromising accuracy or speed, making it ideal for scaling operations.

5. Digital Identity Verification

  • eKYC (Electronic Know Your Customer): eKYC processes allow customers to verify their identities online without the need for physical document submission. This is often done through the use of government databases, such as Aadhaar in India, where user information is verified instantly.
  • Document Verification: Advanced OCR (Optical Character Recognition) technology allows for the automatic extraction and verification of information from uploaded documents, such as passports or driver’s licenses.

6. Video KYC

  • Remote Verification: Video KYC has become increasingly popular, especially during the COVID-19 pandemic, as it allows for remote verification of a user’s identity. During a live video call, a representative verifies the customer’s documents and identity in real-time, ensuring that the person is physically present.
  • Integration with AI: AI can be integrated with video KYC to automatically analyze the video feed, verify document authenticity, and even detect signs of deception or fraud.

7. Cloud Computing

  • Scalable Infrastructure: Cloud-based platforms offer scalable infrastructure for onboarding processes, allowing businesses to handle fluctuating volumes of new customers efficiently. Cloud solutions also support real-time data processing and storage, which is essential for fast and responsive onboarding.
  • Data Security: Cloud computing providers often include advanced security features such as encryption, multi-factor authentication, and secure access controls, helping to protect sensitive customer information during the onboarding process.

8. Omnichannel Onboarding

  • Seamless Experience Across Channels: Omnichannel onboarding allows customers to start the onboarding process on one channel (e.g., a mobile app) and complete it on another (e.g., a web portal), without losing progress. This flexibility improves the customer experience and increases the likelihood of successful onboarding.
  • Unified Customer Profiles: Data from multiple channels is integrated into a single customer profile, providing a holistic view of the customer and ensuring consistency across all touchpoints.

Challenges In Digital Merchant Onboarding

Regulatory Hurdles

The regulatory environment in India is dynamic and often presents multiple complex compliance requirements that can be intimidating for both new entrants and established players in the digital space. Adhering to guidelines set by bodies such as the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), and the Information Technology Act poses considerable challenges, especially when these regulations frequently update to address emerging market realities and technological advancements.

For instance, the RBI’s directive on KYC for financial institutions requires rigorous verification processes which can slow down the onboarding process if not managed with efficient digital tools. Additionally, the evolving framework around GST and digital payments mandates businesses to consistently update their compliance protocols, which can be resource-intensive.

Strategies for Mitigation:

  • RegTech Solutions: Investing in Regulatory Technology (RegTech) can help manage and simplify compliance requirements. These solutions use AI and data analytics to ensure ongoing compliance and can adapt to regulatory changes in real-time, reducing the risk of non-compliance.
  • Continuous Training: Regular training sessions for legal and compliance teams can help businesses stay ahead of regulatory changes. Workshops and seminars conducted by regulatory bodies or industry associations can be invaluable.

Technological Integration Challenges

Integrating state-of-the-art digital onboarding solutions with older, legacy systems can create significant hurdles. These systems often cannot communicate seamlessly without substantial customization or a complete overhaul, which involves high costs and significant downtime—a luxury many businesses cannot afford.

Furthermore, the diversity in software platforms used by various stakeholders in the merchant onboarding chain (e.g., banks, payment gateways, inventory management systems) increases complexity. Ensuring compatibility across all these systems is crucial but challenging.

Strategies for Mitigation:

  • API-Led Connectivity: Using APIs to bridge different technologies is a cost-effective way of integration. APIs allow disparate systems to communicate with each other without extensive modifications.
  • Incremental Integration: Phasing the integration process can minimize disruption. Starting with non-critical functions and gradually scaling up can help manage the risks associated with integration.

Merchant Education And Adoption

Many merchants, especially small and medium-sized enterprises (SMEs) in semi-urban and rural areas, are either unaware of the benefits of digital onboarding or reluctant to adopt new technologies due to fear of the unknown. This reluctance is compounded by the diversity in educational and cultural backgrounds, making widespread adoption challenging.

Strategies for Mitigation:

  • Localized and Simplified Training Material: Providing training and onboarding material in local languages and using relatable contexts can help in better understanding and quicker adoption.
  • Demonstrations and Pilot Projects: Showing the tangible benefits through demonstrations or pilot projects can help merchants understand the value of transitioning to digital platforms. Case studies highlighting success stories from similar businesses can also be very persuasive.
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By Siddharth, ago
RBI Credit Score Update Mandate

RBI Mandates Faster Credit Score Reporting For Lenders

In a significant move towards enhancing the accuracy and timeliness of credit information, the Reserve Bank of India (RBI) has mandated a shift from the traditional monthly reporting of credit data to a fortnightly cycle. This new regulation, effective from January 1, 2025, requires Credit Institutions (CIs) to report credit information to Credit Information Companies (CICs) like CIBIL every two weeks. The change aims to ensure a more up-to-date reflection of borrowers’ financial health, benefiting both borrowers and lenders.

The Importance Of CIBIL Scores In Financial Health

CIBIL scores, a critical metric used by lenders to evaluate the creditworthiness of borrowers, are influenced by various factors, including repayment history, credit utilisation, and the frequency of credit inquiries. With the RBI’s new mandate, the impact of these factors on one’s CIBIL score could be reflected more swiftly, potentially benefiting those who consistently manage their credit well.

Impact Of Fortnightly Credit Score Reporting On Borrowers

For borrowers, the primary benefit of this change lies in the faster reflection of loan repayments and other credit activities on their credit reports. Under the monthly reporting system, it could take up to a month for changes in a borrower’s credit behaviour to be updated in their CIBIL score. With fortnightly reporting, this timeframe is cut in half, providing a more accurate and timely representation of a borrower’s credit standing. This can be particularly advantageous for individuals who are actively trying to improve their credit scores by paying off debt or making timely payments.

Moreover, for those who may be struggling with high levels of debt, the frequent updates could provide earlier warnings of deteriorating credit health, allowing them to take corrective measures sooner.

Benefits For Lenders

Lenders stand to gain significantly from the new reporting schedule as well. Access to more recent data will enable them to make better-informed lending decisions. With more frequent updates on borrowers’ credit activities, lenders can more accurately assess credit risk, reducing the likelihood of lending to individuals who may become over-indebted. This is crucial in maintaining a healthy credit market, where the risk of defaults is minimised, and the financial system remains stable.

Compliance And Penalties With These New Proposed Changes

The RBI has set clear guidelines for compliance, stating that CIs must report credit information by the 15th and last day of each month, with data submission to CICs within seven calendar days. This timeline has now been revised to five calendar days, emphasising the importance of timely data processing. CICs, in turn, are required to ingest this data within five calendar days of receipt. Failure to comply with these regulations will result in penal actions as per the provisions of the Credit Information Companies (Regulation) Act, 2005 (CICRA, 2005).

RBI’s Initiative To Combat Unauthorised Digital Lending Apps

In an additional move to enhance the safety and reliability of digital financial transactions, the Reserve Bank of India (RBI) has announced plans to set up a public repository for digital lending apps. This initiative, revealed by RBI Governor Shaktikanta Das during the monetary policy review on August 8, aims to curb unauthorised practices in the digital lending space.

The RBI’s approach to tackling these unauthorised apps includes requiring regulated entities to report their digital lending applications to the RBI. This reporting mechanism is expected to play a significant role in mitigating the risks associated with unverified and potentially fraudulent digital lending platforms.

Recent Monetary Policy Committee Decisions

In tandem with these regulatory updates, the Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 6.5 per cent. This decision, made by a majority vote of 4:2, reflects the MPC’s ongoing focus on balancing inflation control with economic growth. Additionally, the six-member panel chose to maintain a ‘withdrawal of accommodation’ stance, implying that all other rates, including the Standing Deposit Facility (SDF), Marginal Standing Facility (MSF), and Bank Rate, will remain unchanged.

A new feature called “Delegated Payments” is also being proposed for the United Payments Interface (UPI), allowing a primary user to authorise another person (secondary user) to conduct UPI transactions from the primary user’s bank account, up to a specified limit. This eliminates the need for the secondary user to have their bank account linked to UPI, thereby expanding the accessibility and adoption of digital payments.

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FAQs

Yes, a CIBIL report is mandatory for most lenders when assessing an individual’s creditworthiness before approving loans or credit cards.

The Reserve Bank of India (RBI) does not have a specific credit rating requirement for itself. However, entities regulated by the RBI, such as banks and financial institutions, often need to meet certain credit rating criteria for various financial operations, such as issuing bonds or accessing certain facilities. These ratings are typically provided by accredited credit rating agencies like CRISIL, ICRA, CARE and more.

CIBIL (TransUnion CIBIL), along with other credit information bureaus like Equifax, Experian, and CRIF High Mark, is regulated by the Reserve Bank of India (RBI) under the Credit Information Companies (Regulation) Act, 2005 (CICRA).

Yes, a person can have no CIBIL score. This typically occurs when an individual has no credit history, meaning they have never borrowed money or used credit.

No, credit rating is not mandatory for individuals in India. Credit rating is primarily used for assessing the creditworthiness of corporations and government entities, not individuals. However, individuals do have a credit score, which is generated by credit bureaus based on their credit history.

No, the RBI does not primarily regulate credit rating agencies. The Securities and Exchange Board of India (SEBI) is the primary regulator for credit rating agencies in India. However, the RBI does have some oversight over credit rating agencies in specific areas related to the banking and financial sector.

Anyone with a grievance against any department of the Reserve Bank can submit their complaint to the CEP Cell via email at crpc@rbi.org.in.

CIBIL scores are generated and controlled by TransUnion CIBIL Limited, based on credit information provided by various financial institutions and banks.

By Abhinandan, ago
KYC in EPFO: Importance, benefits, and challenges

EPFO KYC –  Importance, Process, and Benefits

Introduction

The Employees Provident Fund Organisation (EPFO) is a statutory body under India’s Ministry of Labour and Employment. Established to manage the provident fund, pension, and insurance schemes for the workforce, EPFO plays a pivotal role in securing the financial future of employees. One of the critical aspects of managing these schemes efficiently is the Know Your Customer (KYC) process.

What Is EPFO KYC?

EPFO KYC refers to the Know Your Customer (KYC) process mandated by the Employees’ Provident Fund Organisation (EPFO) in India. This process is crucial for verifying the identity and address of EPFO account holders to ensure accurate record-keeping, prevent fraud, and facilitate seamless service delivery.

Importance Of EPFO KYC

  1. Fraud Prevention: KYC helps in verifying the authenticity of account holders, thus reducing the chances of fraudulent withdrawals or claims.
  2. Accurate Record-Keeping: Keeping updated records ensures that employees receive timely benefits and there are no discrepancies in their accounts.
  3. Ease of Transactions: Once KYC is completed, employees can avail of various online services offered by EPFO, making the process more convenient and efficient.
  4. Compliance with Regulations: KYC is a regulatory requirement, and adhering to it ensures that EPFO remains compliant with the laws.

Documents Required For EPFO KYC

To complete the KYC process, employees need to submit specific documents. These documents are typically divided into two categories: identity proof and address proof. Some documents serve as both.

To complete the Know Your Customer (KYC) process for the Employees’ Provident Fund Organisation (EPFO), you need to submit several documents to verify your identity, address, and bank details. Here’s a list of the documents typically required:

1. Identity Proof (Any one of the following)

  • Aadhaar Card: It is mandatory for EPFO KYC as it provides a unique identification number.
  • PAN Card: Required for tax-related verification.
  • Passport: Especially useful if you do not have an Aadhaar card.
  • Voter ID Card: Used for electoral verification.
  • Driving License: Provides both identity and address verification.

2. Address Proof (Any one of the following)

  • Aadhaar Card: Can serve as both identity and address proof.
  • Passport: Provides proof of address.
  • Driving License: Can also be used as address proof if updated with the current address.
  • Utility Bills (e.g., electricity, water, or gas bills): Should be recent (usually within the last 3 months).
  • Rent Agreement: If applicable, a notarized rent agreement can serve as proof of address.

3. Bank Account Details

  • Cancelled Cheque: This is typically required to verify the bank account details.
  • Bank Passbook/Bank Statement: The first page of the passbook or a bank statement showing the account holder’s name, account number, and IFSC code.

4. Passport Size Photograph

  • Recent photographs are often required for updating your profile in the EPFO database.

5. Mobile Number Linked with Aadhaar

These documents must be uploaded online through the EPFO member portal, or you can submit them to your employer, who will assist in completing the KYC process.

EPFO KYC Process

The EPFO KYC process is designed to be straightforward and can be completed online. Here are the steps involved:

  1. Login to UAN Portal: Employees need to log in to the Unified Portal using their Universal Account Number (UAN) and password.
  2. Access KYC Section: Once logged in, navigate to the ‘Manage’ section and select ‘KYC’.
  3. Add Documents: Employees can add their KYC documents by entering the required details and uploading scanned copies.
  4. Verification by Employer: After submission, the employer needs to verify the documents. This is usually done electronically.
  5. Approval by EPFO: Once verified by the employer, the documents are sent to EPFO for final approval.
  6. KYC Status Update: Employees can check the status of their KYC under the ‘KYC’ section of the portal. Approved documents will be listed as ‘Verified by Employer’ and ‘Approved by EPFO’.

Common Issues In EPFO KYC And Their Solutions

Despite the streamlined process, employees may encounter issues while completing their KYC. Here are some common problems and their solutions:

  • Mismatch in Details: Ensure that the details in your KYC documents match those in your EPFO records. Any discrepancies need to be corrected either in the EPFO records or the documents.
  • Document Rejection: If a document is rejected, verify the reason provided and rectify it. Common reasons include unclear scans or incorrect details.
  • Pending Employer Verification: Follow up with your employer if the verification is pending for an extended period.

Updating EPFO KYC Details: Step-by-Step Guide

a. Through UAN Card

  1. Login to EPFO Portal: Visit the EPFO Member Portal and log in using your UAN and password.
  2. Navigate to Profile: Click on ‘View’ from the top menu and select ‘UAN Card.’
  3. Check Existing KYC Details: The UAN Card displays the status of your KYC. If updates are needed, proceed to the ‘Manage’ tab.
  4. Update KYC Details: Select ‘KYC’ under the ‘Manage’ tab, choose the document type you want to update, fill in the details, and submit.

b. Documents Approved Under KYC Tab

  1. Access the EPFO Portal: Login to the EPFO Member Portal using your credentials.
  2. Manage KYC Details: Click on ‘Manage’ and then ‘KYC’ to view and update your KYC details.
  3. Approval Status: Once you submit your details, they will be under ‘Pending’ status until verified by your employer.
  4. Employer Approval: Your employer will digitally approve the documents. You can check the status under the ‘Digitally Approved KYC’ section.
  5. Notification: Once approved, you will receive an SMS confirmation on your registered mobile number.

c. Checking on the EPF India Website

  1. Visit EPFO Website: Go to the EPFO official website.
  2. Member Portal Login: Access the member portal using your UAN and password.
  3. View KYC Status: After logging in, navigate to the ‘Manage’ tab and select ‘KYC’ to see the current status of your KYC documents.
  4. Verification Status: The status will indicate whether the documents are ‘Pending’ or ‘Approved.’ If approved, they will be listed under ‘Digitally Approved KYC.’

Benefits Of Completing EPFO KYC

  1. Seamless Transfers: KYC-compliant accounts facilitate hassle-free transfer of PF accounts when employees change jobs.
  2. Online Claims: Employees can submit claims for PF withdrawal, pension, or insurance benefits online, speeding up the process.
  3. SMS and Email Alerts: KYC enables employees to receive regular updates about their PF accounts via SMS and email.
  4. Enhanced Security: By verifying the identity of account holders, EPFO ensures enhanced security and reduces the risk of identity theft.

Conclusion

Completing the EPFO KYC process is essential for employees to ensure seamless access to their provident fund, pension, and insurance benefits. Employees can ensure their accounts are secure and up-to-date by understanding the importance, process, and benefits of KYC. This guide aims to provide a comprehensive overview of EPFO KYC, helping employees navigate the process with ease and confidence.

FAQs on KYC in EPFO

Yes, completing KYC is mandatory for all EPFO members to avail of online services and ensure accurate record-keeping.

The KYC process typically takes a few days, depending on the verification by the employer and approval by EPFO.

Yes, employees can update their KYC details through the UAN portal if there are changes in their documents or personal information.

 If a document is rejected, check the reason for rejection, correct the issue, and resubmit the document for verification.

While the process is primarily online, employees can also submit their KYC documents through their employer for verification and approval.

By Siddharth, ago
RBI

RBI Raises UPI Transaction Limit For Tax Payments To Rs 5 Lakh

RBI Increases UPI Transaction Limit For Tax Payments

The Reserve Bank of India (RBI) has recently increased the UPI transaction limit for tax payments from ₹1 lakh to ₹5 lakh. This decision aims to enhance the convenience and efficiency of digital payments, particularly for larger transactions, thus promoting the use of digital platforms in the tax payment ecosystem.

Key Highlights:

  1. New UPI Limit:
    • Previous Limit: ₹1 lakh
    • New Limit: ₹5 lakh
  2. Purpose:
    • To facilitate higher-value transactions.
    • To make tax payments more seamless through UPI.
  3. Impact on Users:
    • Easier to handle larger tax payments.
    • Encourages more taxpayers to adopt digital payment methods.
    • Enhances user experience by reducing the need for multiple transactions.
  4. Monetary Policy Committee (MPC) Decisions:
  • The six-member Monetary Policy Committee has decided to keep the repo rate unchanged at 6.5%.
  • The decision reflects a majority stance of 4:2 in favor of maintaining the withdrawal of accommodation.
  • Other rates such as the Standing Deposit Facility (SDF), Marginal Standing Facility (MSF), and Bank Rate also remain unchanged.
AspectPrevious Limit/RateNew Limit/RateDate of Announcement
UPI Transaction Limit for TaxesRs 1 lakhRs 5 lakhAugust 8, 2024
Repo Rate6.5%6.5% (unchanged)August 8, 2024
Standing Deposit Facility (SDF)UnchangedUnchangedAugust 8, 2024
Marginal Standing Facility (MSF)UnchangedUnchangedAugust 8, 2024
Bank RateUnchangedUnchangedAugust 8, 2024

Benefits Of The New UPI Limit:

  • Convenience: The higher limit allows for single, seamless transactions for larger tax payments, reducing the need for multiple transactions.
  • Efficiency: This change is expected to improve the overall efficiency of tax payments and encourage more taxpayers to adopt digital payment methods.
  • Digital Adoption: By facilitating larger transactions, the RBI aims to boost the adoption of digital payments across various segments of the economy.

According to NPCI, “For normal UPI the transaction limit is up to Rs 1 Lakh per transaction. For a few specific categories of transaction in UPI like Capital Markets, Collections, Insurance, Foreign Inward Remittances the transaction limit is up to 2 lakh and for Initial Public Offering (IPO) and Retail Direct Scheme the limit is up to Rs 5 lakh per transaction.

UPI Verification API By AuthBridge: Enhancing Digital Transactions

AuthBridge offers a robust UPI Verification API designed to streamline and secure the process of verifying UPI IDs (Virtual Payment Addresses). This service is crucial for businesses looking to enhance their customer, merchant, or vendor onboarding processes by ensuring that all UPI transactions are conducted with verified and legitimate UPI IDs. Here’s an in-depth look at what this API offers and how it benefits users.

Conclusion:

The RBI’s decision to raise the UPI transaction limit for tax payments is a significant step towards modernizing the financial infrastructure and promoting digital transactions. This move will make it easier for taxpayers to comply with tax regulations and support the government’s push towards a cashless economy.

By Siddharth, ago
GST Multi State Company Presence

ISD Registration Compulsory For Multi-State Presence Companies

The Finance Bill, 2024, introduced several pivotal changes to the Goods and Services Tax (GST) law. Two significant amendments include mandatory Input Service Distributor (ISD) registration for multi-state companies and the imposition of penalties for unregistered machines in the manufacturing of pan masala, gutkha, and other tobacco products.

Mandatory ISD Registration For Multi-State Companies

Starting April 1, 2025, companies operating across multiple states must register as Input Service Distributors (ISD) under the Goods and Services Tax (GST) regime. This mandate is designed to streamline the distribution of input tax credits (ITC) for services availed, ensuring a fair and transparent allocation among various branches of a business.

The Finance Bill, 2024, introduced mandatory ISD registration for businesses with multi-state GST registrations. This change aims to prevent tax evasion and enhance the transparency of ITC distribution among different branches.

The Central Board of Indirect Taxes and Customs (CBIC) has set April 1, 2025, as the deadline for companies with a multi-state presence to register as ISDs. Companies must ensure that they are compliant with this new requirement to avoid penalties and ensure smooth ITC distribution.

What Is An Input Service Distributor (ISD)?

An Input Service Distributor (ISD) is a central office of a business that receives tax invoices for input services and distributes the ITC to its respective branches. This mechanism is crucial for multi-state companies to efficiently manage their tax credits and remain compliant with GST regulations.

Mechanism for ITC Distribution

The GST rules prescribe a specific mechanism for the distribution of ITC by ISDs. The common ITC is apportioned based on the turnover ratio of the different branches under the same Permanent Account Number (PAN). This method ensures a fair allocation of tax credits, reflecting the actual usage of services across branches.

Penalties For Unregistered Pan Masala, Gutkha & Tobacco Manufacturing Machines

Alongside the new notification mandating ISD registration for companies, a significant development is the introduction of strict penalties for manufacturers of pan masala, gutkha, and other tobacco products using unregistered machines. This measure, effective from October 1, 2024, aims to curb tax evasion and ensure compliance within the tobacco manufacturing industry.

Tobacco Unregistered Machines

The Central Board of Indirect Taxes & Customs (CBIC) has outlined specific penalties and compliance requirements for manufacturers of tobacco products. The key provisions include:

  1. Registration of Machines: Manufacturers must register all machines used in the production of pan masala, gutkha, and other tobacco products. This includes disclosing the make, year of production, number of tracks, and capacity of each machine.
  2. Penalties for Non-Compliance: A penalty of ₹1 lakh will be imposed for each unregistered machine manufacturing pan masala, gutkha, and other tobacco products. Additionally, unregistered machines will be subject to seizure and confiscation. However, if the penalty is paid or the registration is completed within three days of receiving the penalty order, the seizure and confiscation will be waived.
  3. Track-and-Trace System: The government has mandated a track-and-trace system to monitor the production and distribution of tobacco products. This system is intended to prevent illicit trade and ensure that all manufactured products are accounted for and taxed appropriately.

Compliance Deadlines

  • October 1, 2024: Deadline for registering machines used in the manufacture of pan masala, gutkha, and other tobacco products.
  • April 1, 2025: Additional compliance measures for mandatory ISD registration for entities with multiple registrations.

FAQs

Under Section 13 of the Finance Act 2024, manufacturers of pan masala, gutkha, and other tobacco products will face a ₹1 lakh penalty for each machine that is not registered.

October 1, 2024 is the deadline for registering machines used in the manufacture of pan masala, gutkha, and other tobacco products.

April 1, 2025 is the deadline for companies to register as ISD’s with GST authorities.

By Abhinandan, ago
RBI New AePS guidelines

RBI Issues New Due Diligence Guidelines For AePS Touchpoint Operators

The Reserve Bank of India (RBI) has introduced new guidelines aimed at fortifying the security of the Aadhaar Enabled Payment System (AePS). These guidelines, issued through a draft circular on July 31, 2024, outline the due diligence required by banks to verify AePS touchpoint operators, alongside proposing new methods for digital payment authentication.

In recent times, AePS has become a target for fraudsters, primarily due to identity theft and the compromise of customer credentials. This necessitated a robust framework to enhance the security of AePS transactions and protect users, especially in rural and semi-urban areas where these services are predominantly used.

Understanding AePS And AePS Touchpoint Operators

According to the RBI, the Aadhaar Enabled Payment System is a Payment System in which transactions are enabled through Aadhaar number and biometrics or OTP authentication. AePS enables basic banking services, viz., cash withdrawal, balance enquiry, mini statement, cash deposit, fund transfer, etc.

AePS touchpoint operators play a crucial role in providing essential banking services in rural and semi-urban regions. These operators facilitate transactions such as withdrawals and fund transfers using an Aadhaar number and biometric authentication. However, the increasing incidents of fraud have highlighted the need for stringent measures to ensure the integrity of these services.

New RBI Guidelines On Due Diligence For AePS Operators

The RBI’s draft circular introduces several key proposals aimed at streamlining the onboarding and monitoring processes for AePS touchpoint operators:

Onboarding Process

  • Single Acquiring Bank: Each AePS touchpoint operator can only be onboarded by one acquiring bank. This measure is intended to simplify the oversight and ensure accountability.
  • KYC Update: Operators who have not performed any financial transactions for six months will need to undergo a KYC (Know Your Customer) update before resuming operations. This ensures that only active and verified operators are facilitating transactions.

Ongoing Monitoring

  • Due Diligence by Banks: Banks must carry out ongoing due diligence for all AePS touchpoint operators they onboard. This includes regular updates and verifications to prevent fraud.
  • Transaction Limits: Transaction limits will be set based on the risk profile of each operator, ensuring that their activities align with their operational scope and risk assessment.
  • Location Consistency: Transactions conducted by AePS touchpoint operators must be consistent with their declared location of operation and their risk profile. This measure aims to detect and prevent suspicious activities.

The RBI has invited public comments on these draft guidelines until August 31, 2024. Following this consultation period, banks and the National Payments Corporation of India (NPCI) will have three months to comply with the new directions from the date of issue.

These new guidelines by the RBI are a strategic move to enhance the security of digital payments in India, particularly in rural and semi-urban areas. By tightening KYC norms and ensuring rigorous due diligence, the RBI aims to prevent fraud and protect users.

Services (including Banking) Offered by AePS

Benefits Of The New AePS Guidelines

The new guidelines by the RBI are set to bring several benefits to the AePS framework and its users:

  • Enhanced Transactional Security

With stringent KYC norms and continuous due diligence, the security of AePS transactions will be significantly enhanced. This will help in reducing the risk of fraud and identity theft, providing users with greater confidence in using digital payment systems.

  • Increased Trust in Digital Payments

By ensuring that AePS touchpoint operators are thoroughly vetted and monitored, the RBI aims to build trust in digital payments, particularly among users in rural and semi-urban areas. This trust is crucial for the continued adoption and growth of digital financial services in these regions.

  • Streamlined Operations

The proposal to have each AePS touchpoint operator onboarded by only one acquiring bank will streamline operations and make it easier for banks to monitor and manage their agents. This simplification can lead to more efficient service delivery and better customer experience.

  • Financial Inclusion

AePS has been a key driver of financial inclusion in India, enabling access to banking services for people in remote areas. The new guidelines will ensure that this system remains robust and secure, continuing to serve its purpose of bringing more people into the formal financial sector.

FAQs

According to the RBI, an acquiring bank is the bank which onboards the AePS touchpoint operators.

According to the RBI, an AePS Touchpoint is the terminal deployed by acquirer banks to facilitate AePS transactions, using Aadhaar based biometric / OTP authentication.

As per the RBI, an AePS Touchpoint Operator is the agent onboarded by the acquiring bank who operates the AePS touchpoint.

According to the RBI, Banks and NPCI shall ensure compliance to these directions within three months from the date of issue.

A bank should apply due diligence when onboarding new AePS Touchpoint Operators and periodically update KYC for operators who have been inactive for six months.

The three key components of KYC (Know Your Customer) are:

  1. Customer Identification: Verifying the identity of the customer through documents such as passports, driver’s licenses, and utility bills.
  2. Customer Due Diligence (CDD): Assessing the customer’s risk profile by gathering and evaluating information on their financial background and business activities.
  3. Ongoing Monitoring: Continuously monitoring customer transactions and activities to detect and prevent suspicious behavior or financial crimes.

KYC (Know Your Customer) involves verifying a customer’s identity through documents to confirm they are who they claim to be.

Due Diligence goes beyond basic identification, involving a deeper investigation into a customer’s financial background, business activities, and risk profile to prevent financial crimes and ensure regulatory compliance.

By Abhinandan, ago
GST Collection July 2024

GST Collection Rises 14.4% YoY In July 2024

After facing flak from the public for not releasing data for June 2024, the Government of India has finally released the Goods and Service Tax (GST) Collection data for July 2024. The GST collection in July 2024 experienced a significant rise, showcasing a robust growth of 10.3% to over ₹1.82 trillion. This increase, primarily driven by domestic transactions in goods and services, marks the third-highest monthly collection since the GST regime’s inception on July 1, 2017. These results have been released following the recently announced 2024 Union Budget and the 53rd GST Council meeting.

According to the data released on August 1, 2024, the gross GST revenue for July stood at ₹1,82,075 crore, which includes:

  • Central GST (CGST): ₹32,386 crore
  • State GST (SGST): ₹40,289 crore
  • Integrated GST (IGST): ₹96,447 crore (including ₹48,039 crore collected on imports)
  • Compensation cess: ₹12,953 crore

After accounting for refunds of ₹16,283 crore, the net GST collection was ₹1.66 trillion, reflecting a 14.4% increase compared to last year. The gross GST revenue has consistently shown an upward trend, with April 2024 setting a record high at ₹2.10 trillion.

State-Wise GST Collection Highlights In July 2024

State-wise, Maharashtra led the GST collection with ₹28,970 crore, followed by Karnataka at ₹13,025 crore, Gujarat at ₹11,015 crore, Tamil Nadu at ₹10,490 crore, and Uttar Pradesh at ₹9,125 crore. Notably, these figures exclude GST on the import of goods.

The rise in GST revenue was not uniform across all states. While states like Karnataka and Gujarat showed double-digit growth rates of 13%, others like Telangana and Andhra Pradesh recorded much lower figures, with Andhra Pradesh even showing a 7% decline.

The overall GST collection for the first four months of FY25 stood at ₹7.39 trillion, marking a 10.2% year-on-year growth. This growth in GST revenue indicates a positive trend in the economy, reflecting increased compliance and economic activities.

GST Reforms And Future Prospects

The government has been actively working on GST reforms to simplify the tax structure and improve compliance. Recently, a rate rationalisation panel was reconstituted to suggest changes in the current GST rates, aiming to streamline them to three distinct rates. Currently, GST is levied at four primary rates: 5%, 12%, 18%, and 28%, in addition to some essential commodities that are exempt from GST.

Challenges In GST Collection

Despite the overall positive growth, some challenges need to be addressed. Several states reported subdued growth in GST collections, and there were significant variances in the growth rates of different sectors. Addressing GST evasion, improving GST return filing processes, and enhancing GST e-invoicing systems are critical areas that require continuous focus.

Highlights From The July 2024 GST Collection Data

Gross GST Revenue:

  • Total: ₹1,82,075 crore (10.3% growth from July 2023)
    • CGST: ₹32,386 crore
    • SGST: ₹40,289 crore
    • IGST: ₹96,447 crore (includes ₹47,009 crore from imports)
    • Compensation Cess: ₹12,953 crore

Net GST Revenue (after refunds):

  • Total: ₹1,65,793 crore (14.4% growth from July 2023)
    • CGST: ₹30,414 crore
    • SGST: ₹37,842 crore
    • IGST: ₹84,880 crore
    • Compensation Cess: ₹12,657 crore

Domestic Revenue:

  • Gross Revenue: ₹1,34,036 crore (8.9% growth from July 2023)
  • Refunds: ₹7,813 crore (34.1% decrease from July 2023)

Import Revenue:

  • Gross Revenue: ₹48,039 crore (14.2% growth from July 2023)
  • Refunds: ₹8,470 crore (1.4% growth from July 2023)

Year-to-Date (YTD) Revenue:

  • Gross: ₹7,38,894 crore (10.2% growth from the same period last year)
  • Net: ₹6,55,966 crore (11.0% growth from the same period last year)

Conclusion

The robust growth in GST collection in July 2024 underscores the effectiveness of the GST regime in India. With ongoing reforms and efforts to improve compliance, the GST system is poised to become even more efficient, contributing significantly to the nation’s economic growth. As the government continues to refine and optimise the GST framework, the focus remains on sustaining high collection growth, ensuring GST compliance, and minimising evasion to maximise revenue.

Key Takeaways From GST Collection Data For July 2024:

  • July 2024 saw a 10.3% increase in GST collection, reaching ₹1.82 trillion.
  • The net GST revenue, after refunds, stood at ₹1.66 trillion, a 14.4% increase from the previous year.
  • State-wise, Maharashtra topped the GST collection chart with ₹28,970 crore.
  • The government is working on rationalising GST rates to simplify the tax structure.
  • Despite overall growth, some states showed subdued growth, highlighting the need for targeted reforms and compliance improvements.

The steady rise in GST revenue reflects the growing tax base and improved compliance, contributing to India’s overall economic stability and growth.

Official GST Collection July 2024 Data Download Link – Click Here
August 2024 GST Collection Report – Click Here

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By Abhinandan, ago
AML Checks for Estate Agents

AML Checks for Estate Agents: Compliance and Risk Management

Introduction

Anti-Money Laundering (AML) regulations are increasingly crucial in the real estate industry. Given the high-value transactions involved in property dealings, the real estate sector is particularly susceptible to money laundering and terrorist financing. Therefore, estate agents must implement robust AML checks to ensure compliance with legal requirements and to uphold the integrity of the market.

Understanding Money Laundering In Real Estate

Money laundering in real estate typically involves the conversion of illegal proceeds into legitimate assets through property transactions. Criminals use real estate transactions to disguise the origins of illicit funds, making them appear legal. The complexity and high value of these transactions make real estate an attractive avenue for laundering money.

Common Methods Of Money Laundering In Real Estate Include:

  • Overpayment or Underpayment: Inflating or deflating the value of property transactions to launder money.
  • Third-Party Transactions: Using intermediaries to conceal the true ownership of the property.
  • Cash Purchases: Utilising large amounts of cash to avoid detection and reporting.
  • Loan and Mortgage Fraud: Obtaining loans or mortgages under false pretences and using the funds to purchase property.

Key AML Checks for Estate Agents

  1. Customer Due Diligence (CDD)

Identity Verification: The first step in CDD is to verify the identity of clients. Estate agents must obtain and verify official documents such as passports, driving licences, and utility bills. This ensures that the individuals or entities involved in transactions are legitimate and prevents fraudulent activities.

Beneficial Ownership Verification: For corporate clients or trusts, it is essential to identify and verify the beneficial owners. This involves understanding the ownership and control structure to ensure transparency and prevent hidden interests. By thoroughly vetting the ownership structure, estate agents can prevent the misuse of corporate entities for illicit purposes.

Risk Assessment: Estate agents should assess the risk level of each client based on various factors, including their background, the nature of the transaction, and the source of funds. Clients deemed high-risk are flagged for enhanced scrutiny, ensuring that potential threats are identified and mitigated early.

  1. Enhanced Due Diligence (EDD)

High-Risk Clients: Clients identified as high risk, such as politically exposed persons (PEPs) or those from high-risk countries, require enhanced due diligence. This involves gathering additional information and documentation to create a comprehensive risk profile. Enhanced scrutiny ensures that all potential risks are thoroughly evaluated and addressed.

Additional Documentation: For high-risk clients, estate agents should request detailed information about the source of funds and wealth. This may include bank statements, employment records, and business documents. This provides a clearer picture of the client’s financial background and helps detect and prevent money laundering activities.

Ongoing Monitoring: Continuous monitoring of high-risk clients is essential. Estate agents should regularly review and update client information and transaction patterns to detect any suspicious activity promptly. This ongoing vigilance helps in identifying and mitigating risks as they arise.

  1. Screening Against Sanction Lists

Sanctions and Watch Lists: Estate agents must screen clients against international sanctions lists, such as those maintained by the United Nations, the European Union, and the Office of Foreign Assets Control (OFAC). This helps identify individuals or entities prohibited from conducting transactions, ensuring compliance with international regulations.

PEP Lists: Politically exposed persons hold prominent public positions and are at higher risk of being involved in corruption. Estate agents should screen clients against PEP lists to ensure enhanced scrutiny of transactions involving PEPs, preventing potential risks associated with high-profile individuals.

  1. Record Keeping

Documentation: Maintaining accurate and detailed records of all client information, transactions, and due diligence checks is crucial for audit purposes and future investigations. Estate agents must comply with documentation requirements, keeping records for the minimum period required by law (typically five years). This ensures that information is available for any regulatory or legal inquiries.

  1. Reporting Suspicious Activity

Suspicious Activity Reports (SARs): Estate agents are required to report any suspicious transactions or activities to the relevant authorities, such as the Financial Intelligence Unit (FIU). This includes any transaction that appears unusual or inconsistent with the client’s known profile. Establishing internal procedures for staff to report suspicious activities to the designated compliance officer is essential. This ensures that potential issues are identified and addressed promptly.

  1. Training and Awareness

Regular Training: Providing regular AML training to all employees ensures they are aware of their responsibilities and the latest regulatory requirements. Training should cover identifying red flags, reporting procedures, and the importance of due diligence.

Awareness Programs: Implementing awareness programs helps educate employees about common money laundering techniques and the importance of AML compliance. This fosters a culture of vigilance within the organisation, ensuring that all staff members are alert to potential risks.

  1. Compliance Programs

AML Policies and Procedures: Developing and implementing comprehensive AML policies and procedures tailored to the real estate sector is vital. These policies should outline the steps for conducting due diligence, reporting suspicious activities, and maintaining records.

Regular Audits and Reviews: Conducting regular audits and reviews of AML processes helps identify any weaknesses and ensures compliance with regulations. This proactive approach allows for continuous improvement of AML practices.

  1. Leveraging Technology for AML Compliance

Data Integration and Analysis: Integrating data from various sources, such as public records, financial databases, and transaction histories, helps create a comprehensive profile of potential clients and partners. Advanced data analysis tools identify patterns and red flags that may indicate potential risks.

Predictive Modelling: Implementing predictive modelling techniques allows estate agents to forecast potential risks based on historical data and current trends. This proactive approach helps in identifying high-risk clients and transactions before they become problematic.

By implementing these comprehensive AML checks and procedures, estate agents can mitigate risks, ensure compliance with legal requirements, and uphold the integrity of the real estate market. These robust measures protect the estate agency, foster trust among clients and stakeholders, and contribute to the global fight against financial crime

The Importance of AML Checks for Estate Agents

  • Legal Compliance: Adhering to AML regulations is not just a best practice, it is a legal requirement. Non-compliance can result in severe penalties, including fines and imprisonment. By implementing robust AML checks, estate agents ensure they meet all regulatory obligations.
  • Protecting Reputation: Involvement in money laundering activities can severely damage an estate agent’s reputation. Effective AML checks help maintain the integrity and trustworthiness of the estate agency, attracting legitimate clients and partners.
  • Risk Management: Thorough due diligence reduces the risk of financial loss and reputational damage. By identifying and mitigating risks early, estate agents can avoid costly legal battles and financial liabilities.
  • Market Integrity: AML checks contribute to the overall integrity and transparency of the real estate market. By preventing illicit activities, estate agents help create a safer and more stable market environment for all participants.

AML Check by AuthBridge

Anti-Money Laundering (AML) regulations are critical for estate agents, given their involvement in high-value transactions that can be targeted for money laundering activities. AuthBridge, a leading provider of risk management and background verification solutions, offers comprehensive AML checks that help estate agents ensure compliance with legal requirements and mitigate associated risks.

Verifying Client Identities – AuthBridge utilizes advanced technology to thoroughly verify client identities through official documents like passports, driving licences, and utility bills. This rigorous verification process ensures that only legitimate individuals or entities are involved in transactions, thereby preventing fraudulent activities. This step is crucial for maintaining the integrity and trustworthiness of the real estate market.

Transparency in Ownership – For corporate clients or trusts, AuthBridge delves into the ownership and control structures to identify and verify beneficial owners. This thorough investigation helps to uncover any hidden interests and ensures full transparency. By understanding true ownership, estate agents can avoid dealings with potentially risky entities and safeguard against the misuse of corporate structures for illicit activities.

Assessing Risk Levels – AuthBridge assesses the risk level of each client by evaluating various factors, such as the client’s background, the nature of the transaction, and the source of funds. Clients who pose higher risks are flagged for additional scrutiny. This risk-based approach allows estate agents to focus their resources on the most critical areas, enhancing overall compliance and security.

Enhanced Scrutiny for High-Risk Clients – Clients identified as high-risk, such as politically exposed persons (PEPs) or those from high-risk regions, undergo a more detailed examination. AuthBridge gathers extensive information and documentation to provide a comprehensive risk profile. This enhanced scrutiny ensures that all potential risks are thoroughly evaluated and mitigated.

Monitoring and Continuous Assessment – High-risk clients are subject to continuous monitoring. AuthBridge regularly reviews and updates client information and transaction patterns to detect any suspicious activity. This ongoing assessment helps estate agents stay vigilant and responsive to emerging risks, ensuring ongoing compliance and security.

Screening Against Sanction Lists – AuthBridge screens clients against multiple sanction lists, including those maintained by international bodies such as the United Nations, the European Union, and the Office of Foreign Assets Control (OFAC). This screening helps identify individuals or entities that are prohibited from conducting transactions. By ensuring compliance with these sanctions, estate agents can avoid legal repercussions and maintain their reputations.

Comprehensive Record Keeping – Accurate and detailed records of all client information, transactions, and due diligence checks are essential for compliance and future audits. AuthBridge ensures that estate agents maintain these records for the required period, typically five years. This comprehensive documentation is crucial for regulatory compliance and can be vital during investigations.

Reporting Suspicious Activities – AuthBridge assists estate agents in identifying and reporting suspicious transactions or activities to relevant authorities, such as the Financial Intelligence Unit (FIU). By establishing internal reporting mechanisms, AuthBridge ensures that potential issues are promptly addressed, enhancing the overall security and integrity of the real estate transactions.

Training and Awareness Programs – AuthBridge provides regular AML training to estate agents, ensuring they are up-to-date with the latest regulatory requirements and best practices. These training sessions cover identifying red flags, reporting procedures, and the importance of due diligence. Additionally, awareness programs help educate employees about common money laundering techniques, fostering a culture of vigilance within the organisation.

Developing Robust Compliance Programs – AuthBridge helps estate agents develop and implement comprehensive AML policies and procedures tailored to the real estate sector. These policies outline the necessary steps for conducting due diligence, reporting suspicious activities, and maintaining records. Regular audits and reviews of AML processes are conducted to identify any weaknesses and ensure compliance with regulations.

Leveraging Technology for Risk Management – AuthBridge integrates data from various sources, such as public records, financial databases, and transaction histories, to create a comprehensive profile of potential clients and partners. Advanced data analysis tools are used to identify patterns and red flags that may indicate potential risks. By implementing predictive modelling techniques, estate agents can forecast potential risks based on historical data and current trends, enabling proactive risk management.

Conclusion

Implementing comprehensive AML checks is essential for estate agents to detect and prevent money laundering activities. By adopting robust due diligence procedures, leveraging technology, and fostering a culture of compliance, estate agents can mitigate risks and ensure they meet legal requirements. These proactive measures not only protect the estate agency but also contribute to a more stable and ethical real estate market.

By Siddharth, ago
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To begin, Tell us a bit about “yourself”

The most noteworthy aspects of our collaboration has been the ability to seamlessly onboard partners from all corners of India, for which our TAT has been reduced from multiple weeks to a few hours now.

- Mr. Satyasiva Sundar Ruutray
Vice President, F&A Commercial,
Greenlam

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