FPJ Exclusive: Defying RBI Orders, Paygate Continues To Operate

FPJ Exclusive: Defying RBI Orders, Paygate Continues To Operate

The RBI was also concerned about banned activities on the platform, such as gambling, betting, forex trading and cryptocurrency transactions.

Dharmesh ThakkarUpdated: Tuesday, August 15, 2023, 12:11 AM IST
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FPJ Exclusive: Defying RBI Orders, Paygate Continues To Operate | File/ Representative

Mumbai: The Reserve Bank of India (RBI) has rejected Paygate India Private Limited’s applications seeking authorisation under the Payment and Settlement Systems Act, 2007, to operate as a payment aggregator and Bharat Bill Payment Operating Unit.

In a letter dated April 18, 2023, a copy of which is with The Free Press Journal, the RBI asked Paygate India, which owns the payment aggregator Safexpay, to cease operations in the country. The central bank asked Safexpay “to stop online payment aggregation activity and close the nodal accounts within 180 days from the date of this letter”.

“Further you are advised not to undertake fresh business” it said.

The central bank’s decision to reject Paygate India’s rejection was linked to the ownership and shareholding pattern of the company, which was in contravention of the Foreign Exchange Management Act. The RBI was also concerned about banned activities on the platform, such as gambling, betting, forex trading and cryptocurrency transactions.

Paygate India is using alternative payment gateway

However, the company continues to conduct operations. An FPJ investigation has revealed that Paygate India is using an alternative payment gateway, France’s Lyra Switch, to accept merchant transactions, foreign exchange and cryptocurrency payments.

Worryingly, Safexpay continues to provide payment settlement services to several government agencies, including Indian Railways Catering and Tourism Corporation, MHADA, Pune Metropolitan Regional Development Authority and Thane Municipal Corporation.

The founder and CEO of Paygate India, Ravi Gupta, told FPJ last week that the RBI had given the company 180 days to cease operations.The RBI’s letter, however, states that “the timeline of 180 days shall account for the time required to handle disputes / failed transactions / chargebacks / refund requests, etc”.

“The 180 days timeline is only to settle handle disputes, failed transactions, chargebacks and refund,” an RBI official confirmed.The central bank further imposed a 12-month cooling period on Paygate India. During this period, the company is “prohibited from submitting application for operating any payments systems under the PSS Act”.

Responding to an email query from FPJ, a spokesperson for the French fintech firm Lyra Switch said: “We aren’t fully aware of the business activities of Safexpay. Post this email Lyra Management has decided to review (its) engagement with Safexpay.”

ED is investigating Paygate India Directors

Meanwhile, the Enforcement Directorate (ED), Chandigarh, is investigating the directors of Paygate India for alleged foreign exchange violations and has ordered them to submit records of payments made to cryptocurrency exchange platform Zebpay, run by ZEB IT Services. The agency has details of foreign direct investments into Paygate India accounts. “Suspicious transactions from IECS Consultancy and Mirch Entertainment into Paygate India accounts was detected,” an official said.

The ED has alleged that Safexpay facilitated Zebpay’s transfer of Bitcoins abroad. The oldest Indian crypto exchange, Zebpay had to shut down operations in India after RBI orders and is under liquidations. Zebpay had allegedly moved operations to Singapore and later to tax haven Malta.

Gupta did not respond to queries regarding the ED notice.

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