The Central Bank of Nigeria (CBN) issued regulatory guidelines on Thursday for the operation of Indirect Participants in the Payment System, beginning November 11.
The central bank disclosed this in a circular issued by the Director of CBN, Department of Payment System Management, Mr. Sam Okojere, to the banks.
Indirect Participants are payment service providers that are financial institutions that do not compensate but settle their payment obligations through clearing banks.
According to the guideline, to qualify as an indirect participant, an institution must: have a satisfactory rating based on the risk of the CBN and obtain a letter of recommendation from its direct participating bank, signed by the Director of Risks and an Executive Director of the participating Bank direct.
The bank also ordered that an indirect participant expect to settle all its payment obligations through a single direct participating bank by payment scheme at a given time.
“The relationship between a direct participating bank and an indirect participant shall be governed by a Conciliation Agreement.
“When an indirect participant’s account with a direct participating bank is not adequately funded, the direct participating bank may refuse other settlement services to the indirect participant and inform the payment processor accordingly.
“Unless otherwise agreed, a direct participating bank or an indirect participant shall notify the other party at least thirty and 30 days in advance before finalizing the Agreement.
Agreement for any other reason, apart from the circumstances in 3.4.
“The canceling party will notify the Payment Service Provider (PSP) of its intention to terminate.
“A direct participating bank and an indirect participating bank will enter into a bilateral agreement to guide the relationship.
“When an indirect participant connects directly to a PSP for transaction processing, the indirect participant, the direct participating bank, and the PSP must enter into a tripartite agreement,” the bank said.
He also indicated that indirect participants should process their electronic reference instruments through the participating bank directly or directly, through the Nigeria Interbank Settlement System (NIBSS).
“In the last option, NIBSS will indicate the source (bank, indirect participant)
of electronic reference requests.
“The receiving bank will not discriminate between electronic references originating from banks and indirect participants.
“An indirect participant must comply with the applicable provisions of the Rules of the Bankers Compensation System of Nigeria (NBCS).”