PRAVAAH's Role In Facilitating Regulatory Synergy Across Financial Entities

Lakshmikumaran & Sridharan


Lakshmikumaran & Sridharan (LKS) is a premier full-service Indian law firm specializing in areas such as corporate & M&A/PE, dispute resolution, taxation and intellectual property. The firm, through its 14 offices across India works closely on litigation and commercial law matters, advising and representing clients both in India and abroad.
The Reserve Bank of India (‘RBI') on 28 May 2024, launched the PRAVAAH (Platform for Regulatory Application, VAlidation, and AutHorization) portal (‘PRAVAAH portal') alongside the Retail Direct Mobile App...
India Finance and Banking
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Background and introduction

The Reserve Bank of India ('RBI') on 28 May 2024, launched the PRAVAAH (Platform for Regulatory Application, VAlidation, and AutHorization) portal ('PRAVAAH portal') alongside the Retail Direct Mobile App, and a FinTech Repository, in line with the requirement highlighted in Union Budget for 2023-24, to simplify, streamline, and reduce compliance costs for financial sector regulators while adhering to time limits, for deciding on applications under various regulations. Presently, the portal provides access to 60 application forms across various RBI departments, along with a general form for requests outside specific categories. All 60 forms are currently accessible on the portal, with plans to introduce more forms with time.

The PRAVAAH portal is a single window mechanism for submission of application/information in an electronic format to the RBI for seeking various approvals.

This is in line with consistent efforts being taken by the RBI to digitise approval processes and establish an effective paperless mechanism. In 2018, the RBI had introduced a new, digitised reporting system for Foreign Direct Investment (FDI) transactions. A Single Master Form ('SMF') was introduced, which integrated various forms that were required to be filed as a reporting requirement under the Foreign Exchange Management Act, 1999 ('FEMA'). A new online portal called FIRMS was introduced, for reporting foreign investments in India through the SMF. Similarly, the RBI had introduced the web based Foreign Liabilities and Assets Information Reporting (FLAIR) system, for Indian entities to report their foreign assets and liabilities to the RBI, which replaced the previous excel based reporting system.

Salient features and benefits of the RBI Pravaah portal

Centralized Approval Portal

The portal serves as a centralized hub for consolidating regulatory approval or reporting into a single platform. This unified approach simplifies the approval process for financial institutions, eliminating cumbersome processes and improving efficiency.

Regular Quality Checks: Validation alerts on the Portal

At the time of filling out the various forms on the portal, applicant must 'Validate' the same, before the approval/application form is submitted or to move to different tabs. This ensures the accuracy and reliability of the information submitted by regulated entities. Real-time validation alerts help applicants rectify errors promptly and minimize discrepancies. For instance, during paper-based filing, there may be typos or errors by an applicant at the time of inserting PAN or CIN/LLPIN.

Monitoring status of applications

Entities will now be able to track the live status of their applications. After submission, updates regarding the application will be sent to the applicant's email and mobile number. The status of the application can also be monitored online. Responses to any queries raised by the RBI can be directly responded to on the portal. Once processed, the RBI's decision on the application will be communicated to the applicant via email and SMS on their registered mobile number.

Quick clarification and response

When applications are submitted by the entities on the portal, the RBI can immediately raise any queries it may have. Due to the digitisation of the entire process, the applicants can respond to them at a quicker pace and make necessary amendments or modifications.

Standardization of Application Process

The PRAVAAH portal will significantly reduce the time taken to process such applications as it standardizes the entire approval process for various entities. The portal provides entities seeking approvals for activities regulated by the RBI, with a standard template in which applications can be filed. The portal also provides an estimated timeline for completion of the application upon submission of the complete set of applications.

Creation of a central repository and a tool for due diligence

The introduction of the portal will facilitate the creation of a repository of sorts, as a digital single interface has been created which will enable entities to apply, monitor the status of, and respond to queries about their applications. Consolidation of all the approvals sought by any entity in one single place would also facilitate the process of conducting due diligence for an entity.

General Purpose Application

An interesting feature of the portal is the provision of a general-purpose application, for entertaining requests which do not come under any other application form. Overtime, a perusal of the requests being made under this feature can enable the RBI to understand any other approvals/applications that need to be brought under the ambit of the portal and subsequently, a specific application form can be developed for the same.

User Manual

RBI has also provided a user manual on the portal, which provides for a detailed flow of the portal, such as the registration of applicant, submission of applications, providing additional information, keeping track of the application etc. along with the screenshot of each tab. The portal also provides a tab for support tickets to be raised regarding any application filed on the portal.

Impact under FEMA and benefits to users

The PRAVAAH portal has established a direct channel between entities/individuals seeking various approvals under the FEMA and the RBI. At present, sometimes the process of seeking approvals under the FEMA is routed through Authorised Dealer ('AD') banks. This often contributed to delays in the regulatory processes, as much time would be spent in navigating the internal processes of these AD banks and then routing it through the RBI.

The portal consolidates several forms which are required to be filed with RBI for seeking different regulatory approvals as per the FEMA. A few significant approvals that are sought under FEMA, and have been integrated on the portal are as follows:

Compounding process

The process of compounding under FEMA would often prove to be a cumbersome one, involving a significant amount of paperwork. Constant back and forth communication and subsequent modifications would increase the time that would be taken for such applications to be processed. However, the PRAVAAH portal has completely digitised this process, and provided an option to provide additional information or an addendum to an already filed compounding application. Confirmation for appearing for personal hearing regarding compounding applications, along with the preferred date, time and information of attending personnel will also be provided by the portal via message or email.

What remains to be seen is the status of compounding applications already filed physically and awaiting processing; whether the RBI will now ask those applications to be filed online. Upon perusal of the compounding form available on the portal, there is still a need to issue demand draft for payment of compounding fees, and to upload a scanned copy of such demand draft, despite the overall system being shifted to an online mode. Additionally, clarity on the process of the payment of compounding penalty, as to whether such penalty will have to be paid physically or online via a link to be provided on the portal, is awaited.

Approvals for opening of Liaison Office/ Branch Office/ Project Office

This is one of the more significant applications being introduced on the portal. Now, an entity can apply online for establishment of a Liaison Office/ Branch Office/ Project Office in India. Presently, this application is filed through the AD bank.

Approval for acquisition or sale of immovable property in India

Approval for acquisition of immovable property in India by foreign nationals/entities as regulated and permitted by the FEMA, can now be sought via the portal. Upon a perusal of the form provided for this purpose on the portal, it is seen that the portal seeks various questions to be answered in order to apply for approval, including the source of fund and relationship with owner.

Benefits for Non-Banking Financial Companies

Streamlining of the process of seeking regulatory approvals by Non-Banking Financial Companies ('NBFCs') is a significant area which has been impacted by the PRAVAAH portal. From requesting a certificate of registration when a change in the name of the NBFC takes place, to seeking approvals for a change in shareholding of the NBFC, all these applications have been brought under the ambit of the PRAVAAH portal. Other approvals regarding NBFCs that can be sought through the portal are:

  1. Request for duplicate certificate of registration due to loss of original certificate of registration
  2. Approval for amalgamation or merger
  3. Appointment of directors
  4. Request for shifting of registered office of the NBFC
  5. Conversion of the category of the NBFC

Comments and way forward

The introduction of the PRAVAAH portal is a significant step towards putting in place a completely paperless mechanism. This portal would also ensure effective monitoring of the applications by the RBI. This also introduces a robust and effective mechanism for regulatory reporting in India and shall exponentially improve turnaround time. Upon perusal of the various applications/forms that have been integrated in the PRAVAAH portal, it is evident that this move by RBI shall benefit the banking companies and non-banking financial companies at large. Digitization of process will help in the introduction of AI based autonomous decision making based on data analytics and past trends.

This initiative of the RBI is similar to the Faceless Assessment Scheme which was launched to facilitate the functioning of the Income Tax Act, 1961. This scheme aims to eliminate human interaction from the processes involved in the direct taxation system in the country, and assesses taxpayers digitally, to remove any need of direct interaction with Income Tax officials.

The RBI has launched the portal only recently. Feedback from the users and an analysis of the issues that may arise will enable the RBI to make necessary modifications or improvements in the future to make it more user friendly. For instance, post the introduction of FIRMS portal for reporting foreign investments, the option to pay late submission fee was also provided through NEFT/RTGS, which replaced the older system of preparing demand drafts and submitting the same to the RBI. We may also expect a set of FAQs to be issued based on the users' experience on the PRAVAAH portal.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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