The Reserve Bank of India (RBI) has rejected the application filed by Paygate India, which operates the payment aggregator Safexpay. It has also directed the company to cease its operations in the country. The letter from RBI to Paygate India Pvt Ltd, which owns Safexpay, is dated April 18, 2023 (FPJ has a copy).
In paragraph number four, the RBI has asked Safexpay "to stop online payment aggregation activity and close the nodal accounts within 180 days from the date of this letter."
The letter stated, "Further you are advised not to undertake fresh business..." The RBI wrote the letter in response to the application for permission submitted by Paygate India, which owns Safexpay
However, the company is still conducting its operations. When asked about this, the founder and CEO of Paygate Ravi Gupta said the RBI has given 180 days time to cease its operations. However, the RBI has stated in its letter that "the timeline of 180 days shall account for the time required to handle disputes/failed transactions/chargebacks/refund requests etc."
Gupta denied that any irregularity has been committed by Safexpay. He noted that the RBI's refusal has a timeline of 180 days. However, RBI's letter explicitly asks Paygate to immediately stop all online payments and onboarding of new merchants. Investigation by FPJ revealed that Paygate was using an alternative payment gateway Lyra Switch of France to accept merchant transactions, foreign exchange and crypto payments.
Responding to an email query from FPJ, spokesperson for the French fintech Lyra 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.”
Blatant violations of the banking regulator Reserve Bank of India to operate Payment Aggregator (PA) and Bharat Bill Payment Operating Unit (BBPOU) for digital payment transactions are under scrutiny.
Safexpay provides digital payment businesses using payments platforms and payment aggregation getways, mobile wallets, payment links, merchant payment applications, QR code payments and instant settlement solutions.
The central bank regulating the Indian banking system had refused authorisation to Paygate India to operate Safexpay payment system on 18 April 2023 observing regulator concerns pertaining to ownership and shareholding of the company in contravention of Foreign Exchange Management Act. RBI questioned Safexpay on merchants undertaking banned activities like gambling and betting, online casino, forex trading and crypto transactions in the Alert List of the central bank.
Significantly, Safexpay continues to provide online payment settlement to several government agencies including Indian Railways Catering and Tourism Corporation (IRCTC) , MHADA, Pune Metropolitan Regional Development Authority, Thane Municipal Corporation and Rajasthan EMitra despite RBI rejection of payment aggregator authorization.
However RBI's letter has asked the company to immediately to stop all online payments and onboarding of new mercants. “The 180 days timeline is only to settle handle disputes, failed transactions, chargebacks and refund,” confirmed RBI official. RBI further invoked 12 months cooling period against Paygate India to operate any payment system.
Meanwhile, the Enforcement Directorate (ED), Chandigrah them is probing the directors of Paygate India for alleged foreign exchange violations and has ordered them to submit records of payments made to crypto currency exchange platform Zebpay run by ZEB IT Services. The anti money laundering probe agency had details of Foreign Direct Investment (FDI) into Paygate India accounts. “Suspicious transactions from IECS Consultancy and Mirch Entertainment into Paygate India accounts was detected,” confirmed a senior ED official.
ED has alleged that Safexpay payment aggregator allegedly facilitated crypto exchange Zebpay to transfer bitcoins abroad. The oldest Indian crypto exchange Zebpay had to shutdown operation in India after RBI orders and is under liquidations. Zebpay had allegedly moved operations to Singapore and later to tax haaven Malta. Gupta did not respond to queries regarding the notice from ED.
