OPGSP in India: Everything You Need to Know About Online Payment Gateways

With more than 15 million freelancers and close to USD 200 billion worth of software and IT services exports in the year 2023–24 alone, doing business across borders has become easier, faster, and more common than ever. However, receiving payment across borders isn’t as simple as sending an invoice and receiving money. Most traditional bank wires come with massive fees, delayed processing, and a maze of paperwork that can be more excruciating than the project it paid for.

That’s where the Online Payment Gateway Service Provider (OPGSP) framework steps in. Introduced by the Reserve Bank of India (RBI), OPGSPs are designed to make low-ticket export payments smooth, fast, and fully compliant.

Let’s understand how OPGSP works, who it’s for, why it matters, and what’s changing as the RBI transitions toward newer models like PA-CB.

OPGSP is short for Online Payment Gateway Service Provider—a system launched by the Reserve Bank of India (RBI) in 2010 to facilitate Indian exporters to receive international payments speedily and with compliance.

Previously, exporters had to use full-fledged SWIFT wire transfers and lengthy documentation for even low-value transactions. It was time-consuming, costly, and inconvenient for online service providers. To bridge this gap, the RBI introduced the OPGSP model for cross-border low-value payments. The OPGSP limit per export transaction was USD 10,000.

The OPGSP facilitates international payments to Indian exporters—particularly small and digital-first companies, with less friction. Here’s how it works:

1. Customer abroad makes a payment

An overseas customer makes a payment, generally by credit card, bank transfer, or digital wallet, on an RBI-accredited Online Payment Gateway Service Provider (OPGSP).

2. Funds held in escrow/nodal account

The payment in foreign currency is received by the OPGSP and kept in a nodal or escrow OPGSP account, kept in liaison with an ADC-I bank partner.

3. Payment through AD-I bank and NOSTRO account

The OPGSP has a formal agreement with an AD-I bank, a bank licensed by the RBI to deal in foreign exchange transactions. The AD-I bank maintains a NOSTRO collection account, where foreign currency is received and held before conversion.

4. Currency conversion and credit to exporter

Foreign currency in the NOSTRO account is exchanged into Indian Rupees (INR) by the AD-I bank. The amount of INR is credited directly to the exporter's Indian bank OPGSP account.

5. Automated documentation and compliance

After making the payment, the exporter receives compliance documents like FIRA (Foreign Inward Remittance Advice) or e-FIRA automatically, without having to undertake manual follow-ups with the bank.

• Transaction cap: The OPGSP limit is up to USD 10,000 per export order.

• Export types allowed: Software exports and small goods shipments are permitted. 

• Physical goods warehousing: AD Category-I banks may permit exporters with ≤5% export outstanding and ≥USD 100,000 turnover to open or hire warehouses abroad for one year, subject to RBI conditions.

• Timely settlement: Payments must be settled into the Indian bank account within 7 working days from the date of credit into the OPGSP account.

• RBI approval not required (for exporters): As long as the platform is RBI-approved and the partnering bank is an AD-I, exporters do not need separate approval.

• OPGSP: Serves as the electronic go-between, receiving payments from overseas clients and channeling them through the right channels.

• AD category-I bank: Provides forex compliance, makes the currency conversion, and allows the final settlement to the account of the exporter.

• Exporter: Merely forwards their linked OPGSP account details to foreign clients and gets paid without having direct contact with the forex regulations or banking procedures.

The OPGSP guidelines were designed with accessibility in mind, specifically for small service exporters and MSMEs that may not be able to afford the complexity of international banking systems. If you're an Indian citizen residing and earning from foreign clients for online services, there’s a good chance you qualify to use an OPGSP.

Criteria for eligibility

To use the OPGSP route, exporters must meet certain basic conditions:

• Resident in India: You must be an Indian resident as per FEMA guidelines.

• Exporting permissible items: Only exports of goods and services that are permitted under Foreign Trade Policy (FTP) are allowed. Certain sectors (like defense-related exports) may be restricted.

• Transaction limit: Each transaction must be below USD 10,000. Anything higher must go through standard bank remittance routes.

• Proper documentation: Exporters must retain relevant invoices and shipping/service records, even though the OPGSP platform and bank handle most compliance.

Regulatory framework: What the rules say

As OPGSPs handled increasing volumes of cross-border payments, RBI intervened to impose stringent regulatory control. Here's how the system remained secure and compliant:

1. PSS Act, 2007: This act granted the RBI the authority to regulate payment systems, overseeing OPGSPs and maintaining order in transaction flows.

1. IT Act, 2000: Gave legal support to electronic payments, addressed cybercrime, and implemented data protection, essential for international confidence.

1. KYC & AML Regulations: OPGSPs were required to authenticate merchant identities, track suspicious behavior, and record detailed transaction history to deter abuse.

1. AD Bank Model: OPGSPs operated through Authorized Dealer Category-I banks, placing a regulatory cushion. This added security, however, at times it cramped operational dexterity.

Types of permitted transactions

As per the existing system, the following are generally permitted through OPGSPs:

• Export of IT services (software, content creation, IT services)

• SaaS subscription sold to foreign customers

• Small quantity physical goods being transported directly to end customers

Under OPGSP, the below-listed services are excluded:

• Yoga classes 

• Cooking classes 

• Accounting

• Bookkeeping

• Website design

• Online consulting

• Education

For small businesses and consumers, OPGSPs offer a more accessible gateway into international trade compared to conventional wire transfers.

Major advantages are:

1. Streamlined process for low-ticket cross-border payments

The conventional remittance mechanism via banks is typically cumbersome, involving complex documentation, compliance issues, and slower processing times which is the bane of small payments. OPGSPs minimize this. Exporters can receive export order payments of up to USD 10,000 without needing to deal with SWIFT codes, foreign bank information, or manual compliance filings. From the initiation of a payment to settlement, the process is fully automated and integrated into the OPGSP platform and its partner bank.

2. No need to establish a foreign entity

Opening an OPGSP account with a bank or entity outside to accept international payments is not practical or possible for most Indian MSMEs or freelancers. The OPGSP model takes away this necessity. You can conduct business fully out of India, in INR, and still receive payments from New York to New Zealand. The foreign exchange is received by the OPGSP, exchanged into INR, and settled into your Indian bank account, all without requiring any overseas infrastructure.

3. Quick settlements and competitive forex rates

OPGSP platforms are designed to be quick and agile. Typically, exporters receive payment within 2–4 working days, which is much quicker than through traditional wire transfers. And, because OPGSPs deal with major banks and transact high volumes, they tend to provide more favorable forex conversion rates than ad hoc conversions at domestic banks. More rupees in your account for every dollar received.

4. Compliance managed through AD-I banks

Compliance under FEMA and RBI regulations is mandatory, but can be daunting to a non-bank acquaintance. OPGSPs make this easy as they operate solely through Authorized Dealer Category-I (AD-I) banks. These banks undertake all the necessary due diligence, foreign exchange documentation, and reporting to the RBI. Exporters obtain necessary documents, such as FIRA or e-FIRA, which gives them peace of mind during tax or audit time.

While beneficial, the OPGSP model is not suitable for every exporter, particularly those handling higher volumes or physical goods that require sophisticated documentation.

Major limitations are:

1. Transaction cap of USD 10,000

The biggest limitation of the OPGSP guidelines is the transaction ceiling of USD 10,000 per export order. This is perfect for freelancers and small-ticket trades but not for companies that engage in high-value B2B transactions or long-term project-based work. If you have a client who regularly invoices you for amounts larger than this, you'll have to fall back on standard bank transfers or establish international banking infrastructure.

2. Chargebacks and risk management

Because most OPGSP platforms also accommodate credit card or e-wallet payments, chargebacks and disputes are possible, particularly for industries centered on services where the deliverables are intangible. In such situations, the exporter may not have strong recourse avenues. Moreover, in contrast to regular banking channels, OPGSPs could have weak dispute resolution mechanisms, which makes risk management difficult.

3. Banks' reluctance due to risk exposure

Even after receiving RBI approval, certain Indian banks remain hesitant to partner with OPGSPs due to risk exposure, Anti-Money Laundering (AML) responsibilities, and compliance complexity. This implies that all AD Category-I banks are not willing to collaborate with all OPGSPs. Therefore, certain exporters can experience difficulties in making settlements or delayed receipt of compliance documents if the banking association isn't strong.

4. Limited operational scope for foreign OPGSPs

Although the OPGSP guidelines permitted foreign firms to operate in India through the establishment of a liaison office (as opposed to a full subsidiary), this was subject to certain limitations. Liaison offices, as per FEMA regulations, are not permitted to undertake direct commercial functions, restricting their capability to offer local support, resolve disputes, or sustain infrastructure on their own. 

Consequently, foreign OPGSPs depended largely on cooperating AD Category-I banks, resulting in diminished control and possible delays, which is one of the principal operational drawbacks.

While India's digital economy expanded and cross-border freelancing and SaaS exports took off, the initial OPGSP model, launched in 2010, started to look a little stodgy. Something that served well for a small number of low-priced service exports at one point was no longer quite adequate for the fast-changing global payments landscape. This awareness prompted the Reserve Bank of India (RBI) to revise and enhance the model with a new framework, which was proposed as the Online Export-Import Facilitators (OEIF).

Introduction of OEIF draft

To support changing fintech models and global payment needs, the RBI issued draft guidelines for a new structure, Online Export-Import Facilitators (OEIF), in 2021. This was proposed to be a step up from the OPGSP guidelines, with more utility and well-defined compliance requirements.

The OEIF model sought to:

• Increase OPGSP limit on transactions (less than USD 15,000 in export)
• Facilitate quicker settlement of export proceeds
• Implement stricter KYC norms and compulsory reporting
• Permit export and import facilitation under a single canopy

Nonetheless, these draft guidelines were never officially sanctioned. Instead, they formed the basis for what eventually became an even stronger, legally established framework: the Payment Aggregators – Cross Border (PA-CB) system.

In 2023, RBI issued final guidelines under the PA-CB model, replacing OPGSP. The step effectively succeeds the older OPGSP model and subsumes OEIF-type operations under a more formal and tightly controlled framework.

The following are the major changes from OPGSP to PA-CB:

With PA-CB, the RBI can centralize and formalize cross-border payment operations—no more patchwork frameworks or de facto models. All the players in the space now come under one, integrated framework.

RBI’s final rules and classifications

In its regulations, the RBI instituted three forms of PA-CB licenses depending on the nature of cross-border transaction:

1. Import-only PA-CB: Allows payment for import of goods and services into India.
2. Export-only PA-CB: Received export proceeds from foreign customers.
3. Both: Allows both inward and outward under tight supervision.

Applicants for a PA-CB license are required to:

• Provide detailed operating plans
• Demonstrate strong KYC, AML, and anti-fraud systems
• Hold escrow OPGSP accounts and adhere to stringent settlement schedules
• Adhere to FEMA and RBI reporting standards

Practical impact on cross-border businesses

For Indian service exporters and MSMEs, it introduces more security, trust, and transparency into cross-border payment frameworks. The advantages are:

• Compulsory RBI licensing: Exporters who utilize platforms need to now ensure the platform is RBI-approved as a PA-CB. Unlicensed platforms can be restricted or lose banking alliances in India.
• Direct RBI registration for payment platforms: These platforms are required to register directly with the RBI, adhere to stringent Know Your Customer (KYC) guidelines, maintain escrow accounts, and submit regular reports.
• Stricter norms for AD-I banks: Authorized Dealer Category-I banks dealing with PA-CBs are required to comply by April 30, 2024.

PA-CB vs OPGSP vs OEIF: What’s changing?

Here’s how the three models stack up:

As India's digital economy deepens, and more freelancers and SaaS providers access international markets, the need for easy, quick, and compliant export payment solutions will only increase.

Below are some possible Business Use Cases for PA-CBs for exporters:

1. Currency conversion and hedging: Provide forex conversion and hedging as a service based on customer requirements.

1. Wallet payments: Facilitate interoperable wallet-based payments.

1. QR-based payments: Make available QR codes for secure, account-less collection of payments.

1. Line of credit: Enable immediate payments through credit facilities (for import PA-CBs).

1. Embedded payment links: Embed payment links on websites/chatbots for easy collections.

1. Shareable payment links: Create and share payment links without a website.

1. Recurring payments: Enable subscription-based and scheduled international payments.

1. Virtual account management: Enable tracking and reconciliation of receivables through virtual OPGSP accounts.

1. Export bill discounting: Provide prepayment of export bills, perhaps supported by a letter of credit.

For exporters, the writing is on the wall: work only with platforms that are proactive about compliance. XFlow is one such example of a partner that has designed its infrastructure around RBI’s evolving expectations, from transparent forex conversion to real-time reporting and AD-I bank integration.

Choosing a forward-compliant platform like XFlow ensures:

• Your payments won't face disruptions as rules evolve

• You stay ahead of RBI audits and documentation requirements

• You access support built for long-term export success, not short-term fixes

You've built a product or service the world needs. However, navigating international payments can feel overwhelming with exchange rates, bank delays, and ever-changing RBI guidelines.

Let XFlow make it easy.

Crafted for Indian startups and businesses alike, XFlow helps you with:

• Market-best FX rates = increased earnings

• Faster settlements = enhanced cash flow

• Hassle-free compliance = no back-and-forth with banks

• Enterprise-grade APIs = serious infrastructure for serious growth

• Automated features = designed around your business

• Smart virtual accounts = collect globally, operate locally

• Instant reports and e-FIRA = audit-ready, always

• Comprehensive regulatory support = stay ahead of RBI updates

Choose XFlow to future-proof your international payment process, because scale demands stability. Sign up today!