PA-CB: Payment Aggregator – Cross Border Model in India

The globalization of digital commerce has propelled the demand for efficient, secure, and compliant cross-border payment systems. In response to this growing need, the Reserve Bank of India (RBI) introduced the Payment Aggregator – Cross Border (PA-CB) framework. This model allows Indian entities to facilitate cross-border payment transactions for import and export of goods and services, streamlining international trade while maintaining oversight and compliance.

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What is a PA-CB?

A Payment Aggregator – Cross Border (PA-CB) is an entity authorized by the RBI to process and facilitate international transactions, acting as a bridge between Indian merchants and global customers (and vice versa). Unlike domestic Payment Aggregators (PAs), PA-CBs handle foreign exchange inflows and outflows, ensuring adherence to India’s foreign exchange laws such as FEMA (Foreign Exchange Management Act, 1999).

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Background and Regulatory Evolution

The RBI, recognizing the rising volume of cross-border e-commerce and service exports, released a discussion paper in 2021, followed by guidelines in November 2022, bringing clarity and structure to PA-CB operations. The goal was to promote ease of doing business for exporters and importers while ensuring transparency, KYC compliance, and end-use verification.

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Scope of Activities under PA-CB

Entities authorized as PA-CBs can engage in the following:

1. Export Transactions:

• Facilitate payments for goods and services exported by Indian entities.
• Collect foreign currency from overseas buyers and convert it into INR for settlement with Indian exporters.
• File necessary reports with RBI and Authorised Dealer (AD) banks under the Export Data Processing and Monitoring System (EDPMS).

2. Import Transactions:

• Allow Indian consumers or businesses to make payments for imports through digital means.
• Route foreign currency outward remittances via designated AD banks under Import Data Processing and Monitoring System (IDPMS).
• Ensure that imports are genuine and not violating FEMA or any anti-money laundering laws.

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Key Regulatory Guidelines

1. Licensing:

Entities seeking to operate as PA-CBs must:

• Be incorporated in India.
• Obtain authorization from the RBI under Section 10(1) of FEMA.
• Maintain a minimum net worth of ₹15 crore at the time of application, increasing to ₹25 crore within 3 years.

2. Escrow and NOSTRO Arrangements:

• PA-CBs must operate INR Escrow Accounts for domestic settlement.
• Foreign currency collections must be handled through NOSTRO accounts maintained with AD banks.

3. KYC and AML Compliance:

• Mandatory customer due diligence (KYC) for both Indian and foreign entities involved.
• Compliance with AML/CFT guidelines issued by the Financial Intelligence Unit and RBI.

4. Settlement Timelines:

• Export proceeds must be settled with Indian exporters within 7 working days of receipt.
• Import payments should be executed promptly to avoid regulatory non-compliance.

5. Reporting and Audit Requirements:

• PA-CBs must file regular reports on transaction volumes, types, sources, and beneficiaries.
• Annual system audits and periodic compliance checks are mandatory.

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Importance of PA-CB in Fintech & Trade

1. Empowering Indian Exporters:

The PA-CB model simplifies the collection of payments from international clients, especially for:

• Freelancers
• SaaS providers
• IT service exporters
• D2C (Direct-to-Consumer) brands selling overseas

2. Boosting Digital Commerce:

It enables faster onboarding and payment realization for cross-border e-commerce platforms, which are vital for MSMEs and startups targeting global markets.

3. Enhancing Regulatory Oversight:

With direct RBI oversight and structured reporting, the PA-CB framework ensures robust monitoring of capital inflows and outflows, reducing risks of fraud and money laundering.

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Comparison: PA-CB vs PA-Domestic

Feature	PA-CB	PA-Domestic
Regulator	RBI (under FEMA)	RBI (under PSS Act)
Currency Involved	Foreign & INR	INR only
Escrow Account	INR + NOSTRO	INR only
Transaction Type	Cross-border (Import/Export)	Domestic
KYC/AML	Global + Local	Local only

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Challenges & Considerations

Despite the advantages, PA-CBs face several challenges:

• Complex compliance requirements with both RBI and FEMA.
• Currency volatility risks impacting final settlement amounts.
• Bank dependencies for NOSTRO arrangements and real-time settlements.
• Ensuring fraud prevention across jurisdictions with different legal standards.

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The PA-CB framework is a critical enabler of India’s ambitions to become a global digital commerce hub. By streamlining the cross-border payment infrastructure, it empowers exporters, protects consumers, and fortifies regulatory compliance. With increasing demand for cross-border digital services and goods, PA-CBs will play a pivotal role in shaping the future of India’s international payment ecosystem.