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Google Pay is not payment system operator: RBI to Delhi HC

June 25, 2020

Recently, in the case of Shubham Kapaley v. Reserve Bank of India and Ors.,[1] the nation’s central bank i.e. the Reserve Bank of India (hereinafter referred to as ‘RBI’) has submitted to the Delhi High Court that Google Pay is not a payment system operator[2]. In response to the above mentioned case, the RBI has stated that Google Pay is not a digital transaction platform and thus it does not operate any payment systems. In the above case, it was alleged by the Petitioner that Google Pay (popularly known as GPay) was operating without getting any mandatory and requisite authorisation from the RBI.

RBI: Google pay was not operating a payment system as it is third party app provider

In India, the payment and settlement systems are regulated by the Payment and Settlement Systems Act, 2007 (hereinafter referred to as ‘PSS Act’) which was legislated in December 2007.[3] As per the PSS Act a ‘payment system’ is defined as ‘“a system that enables payment to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them, but does not include a stock exchange. It also includes the systems enabling credit card operations, debit card operations, smart card operations, money transfer operations or similar operations.”[4] Pressing on the above issue, the RBI stated that Google pay was not operating a payment system as it is a third party app provider. A third party app is where a software application is developed and made by a different entity or person other than the manufacturer of the operating system.

The Petitioner in the above case had earlier contended that as Google Pay is not mentioned in the National Payments Corporation of India’s (NPCI) list of authorized payment system operators’ it does not qualify to continue operating payment settlements. The NPCI list referred herein was released on March 20, 2019. Aligned on the same lines, RBI clarified that as it does not operate any payment system, it was placed in the NPCI’s list. However, RBI in this regard has said that the activities carried out by Google Pay is not in violation of the PSS Act.

After the response has been submitted by the RBI, the above case is now listed for further hearing on July 22, 2020. Keep watching this space for more updates on the same.

[1] W.P. (C) 3073/2020, CM APPL.No.10685/2020

[2] https://economictimes.indiatimes.com/industry/banking/finance/google-pay-not-a-payment-system-operator-rbi-to-hc/articleshow/76482890.cms?from=mdr

[3] https://www.rbi.org.in/scripts/PaymentSystems_UM.aspx

[4] Section 2(i) of the PSS Act

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