CBN unveils new operating guidelines for indirect payments system

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In other to further deepening financial system in Nigeria through robust payments system, the Central Bank of Nigeria (CBN) has issued new operating guidelines for Indirect Participants in Payments System.

In a circular which was cited on CBN website, dated October 10, 2019 with Reference number: PSM/DIR/CON/CWO/02/091, address to all Deposit Money Banks and Other Financial Institutions Saying Circular on the Regulation for the Operation of Indirect Participants in the Payments System.


The circular which was endorsed by Sam Cokojere, Director, Payments System Management Department of CBN said the apex bank in furtherance of its mandate for the development of electronic payments system in Nigeria hereby issues the Regulation for the Operation of Indirect Participants in the Payments System with effect from November 11, 2019.


The Circular further noted that the CBN exercise its powers conferred under the CBN Act 2007 to promote sound financial system in Nigeria, issue regulations to facilitate the development of an efficient and effective payments system in Nigeria.


Furthermore, circular said to qualify as an indirect participant, an institution shall have a satisfactory risk-based rating from the CBN and secure a letter of recommendation from its direct participating bank, signed by the Chief Risk Officer and an Executive Director of the direct participating bank; and comply with the NUBAN Standards.


The circular stated that only direct participating banks are permitted to settle payment obligations of indirect participants. “An indirect participant shall settle all its payments obligations through only one direct participating bank per payment scheme at any given time.


The circular contained that the relationship between a direct participating bank and an indirect participant shall be governed by a Settlement Agreement. Where the account of an indirect participant with a direct participating bank is not adequately funded, the direct participating bank may decline further settlement services to the indirect participant and inform the payment processor accordingly,” it said.

Continuing, it said that except as otherwise agreed; a direct participating bank or an indirect participant shall give at least 30 days’ notice to the other party before terminating the Settlement Agreement for any other reason apart from the circumstances in 3.4. The terminating party shall notify the Payments Service Provider (PSP) of its intention to terminate, it added.


The objectives of this Regulation shall be to: set  out  the  procedures  for  effective  integration  of  indirect  participants  in  the payments system in Nigeria, standardise  the  operation  of  indirect  participants  in  the  payments  system, taking into cognisance their operational risks; provide mechanism and framework for the clearing and settlement of  indirect participants payment instruments through the direct participating banks; and strengthen  indirect  participants  for  effective  contribution  to  digital  financial services in Nigeria.

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