Rules for Processing Direct Debit Payments in the Batch Clearing System

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Date of creation: 2022-12-23

Registered in the Ministry of Justice of the Kyrgyz Republic

September 12, 2008. Registration No. 104-08

Approved by the Resolution of the Board of the National Bank of the Kyrgyz Republic dated July 30, 2008 No. 30/6

RULES for Processing Direct Debit Payments in the Batch Clearing System

(As amended by the Resolutions of the Board of the National Bank of the Kyrgyz Republic dated June 14, 2017 No. 2017-P-19/24-8, November 24, 2021 No. 2021-P-14/64-6, December 7, 2022 No. 2022-P-14/76-6)

1. General Provisions

1.1. These Rules for Processing Direct Debit Payments (hereinafter the Rules) define the procedure for processing direct debit payments in the Batch Clearing System of Small and Retail Payments in the Kyrgyz Republic (hereinafter the System), as well as the relationships and obligations of the payer, paying bank, recipient, and receiving bank (hereinafter collectively participants) and the System in accordance with the Civil Code of the Kyrgyz Republic, the Laws of the Kyrgyz Republic "On Banks and Banking Activities", "On the Payment System of the Kyrgyz Republic", "On Electronic Signature", and the following regulatory legal acts of the National Bank of the Kyrgyz Republic:

• Regulation "On Non-Cash Settlements in the Kyrgyz Republic", approved by Resolution of the Board of the National Bank of the Kyrgyz Republic dated December 8, 2021 No. 2021-P-14/68-7-(PS);

• Regulation "On the Batch Clearing System of Small, Retail and Regular Payments in the Kyrgyz Republic", approved by Resolution of the Board of the National Bank of the Kyrgyz Republic dated December 15, 2005 No. 37/8;

• Instruction "On the Procedure for Processing Payments in the Batch Clearing System of Small, Retail and Regular Payments in the Kyrgyz Republic", approved by Resolution of the Board of the National Bank of the Kyrgyz Republic dated August 22, 2007 No. 38/11 (hereinafter the SPK Instruction);

• Instruction "On the Procedure for Filling Out Payment Documents", approved by Resolution of the Board of the National Bank of the Kyrgyz Republic dated July 25, 2007 No. 36/5;

• Rules for Filling Out Formats of Electronic Payment Documents and Messages of the Batch Clearing System of Small, Retail and Regular Payments in the Kyrgyz Republic, approved by Resolution of the Board of the National Bank of the Kyrgyz Republic dated March 2, 2006 No. 5/10 (hereinafter the Format Filling Rules).

(As amended by Resolution of the Board of the National Bank of the Kyrgyz Republic dated December 7, 2022 No. 2022-P-14/76-6)

1.2. The list of commercial banks providing direct debit payment services is published on the official website of the National Bank of the Kyrgyz Republic (hereinafter - National Bank).

(As amended by Resolution of the Board of the National Bank of the Kyrgyz Republic dated June 14, 2017 No. 2017-P-19/24-8)

1.3. The terms and definitions used in these Rules correspond to the terms and definitions provided in the regulatory acts specified in paragraph 1.1.

1.4. Additionally, the following terms and definitions are used in these Rules:

• payment order in the form of direct debit (hereinafter Order) - a prior issuance by the payer to the recipient of consent for payment services by submitting a direct debit order to the payer's bank account at the paying bank. The Order may be executed within a service provision contract concluded between the consumer and the service provider. The Order is executed on paper and constitutes an official document;

• payer - a natural or legal entity making payments for goods, services, and works through pre-authorized direct debit from its bank account opened at the paying bank;

• recipient - a legal entity (organization) providing services and collecting payments for services, social, budget, and insurance contributions using the pre-authorized direct debit form based on the Order received from the payer;

• receiving bank - a bank of the recipient's funds that has concluded an agreement (contract) with the recipient regarding direct debit payments;

• paying bank - a bank where the payer's account is opened, which has concluded an agreement (contract) with the payer regarding direct debit payments by debiting funds from the payer's bank account upon receipt of payment documents for direct debit payments from the specified recipient.

(Paragraph lost force in accordance with Resolution of the Board of the National Bank of the Kyrgyz Republic dated November 24, 2021 No. 2021-P-14/64-6)

(As amended by Resolutions of the Board of the National Bank of the Kyrgyz Republic dated June 14, 2017 No. 2017-P-19/24-8, November 24, 2021 No. 2021-P-14/64-6)

1.5. The maximum period for processing direct debit payments from the payer's account based on the Order may be 5 (five) clearing days. This period includes 3 (three) clearing days from the submission date to the processing date of payment documents for direct debit payments, and 2 (two) clearing days from the processing date to the settlement date.

1.6. When processing direct debit payments in the System, the following dates are provided:

• submission date - the date on which the receiving bank sends payment documents for direct debit payments. The submission date is automatically assigned to payment documents upon their arrival in the System. The submission date may coincide with or precede the processing date by no more than 3 (three) clearing days;

• processing date - the date on which payment documents for direct debit payments are included in the calculation of the preliminary net position;

• settlement date - the date on which final settlement is made for payment documents for direct debit payments. The settlement date is automatically set upon receipt of payment documents for direct debit payments in the System and equals 2 (two) clearing days from the processing date.

1.7. When receiving and providing direct debit payment services, participants are obliged to comply with the requirements of these Rules, which stipulate the obligations and liability of each participant.

2. Main Stages of the Direct Debit Payment Process

2.1. Preparation of the electronic statement by the recipient

2.1.1. The recipient forms an electronic statement for direct debit payments from the payer's bank account in Excel or Dbf formats, in accordance with the Instruction "On the Procedure for Filling Out Payment Documents", approved by Resolution of the Board of the National Bank of the Kyrgyz Republic dated July 25, 2007 No. 36/5, and transfers it to the receiving bank via existing communication channels or external media (floppy disks, flash drives, CDs, etc.).

(As amended by Resolutions of the Board of the National Bank of the Kyrgyz Republic dated June 14, 2017 No. 2017-P-19/24-8)

2.1.2. The recipient bears responsibility for the correctness of the data in the electronic statement for direct debit payments, timely preparation of the electronic statement, and its transfer to the receiving bank.

2.1.3. In case the recipient indicates an incorrect direct debit payment amount to be paid from the payer's bank account due to the recipient's fault, the recipient informs the receiving bank of the error for the formation of a payment refund/cancellation by the receiving bank, which is accepted by the System during the period from the submission date to the settlement date according to the clearing day schedule.

(As amended by Resolution of the Board of the National Bank of the Kyrgyz Republic dated November 24, 2021 No. 2021-P-14/64-6)

2.1.4. Upon receipt of a refusal from the paying bank for direct debit payments, the recipient investigates the reasons and makes a decision to independently and/or with the payer initiate a repeat payment with corrected payer details and/or another solution (by agreement with the payer).

2.1.5. In case of payment from the payer's bank account of an incorrect direct debit payment amount due to incorrectly indicated data by the recipient, the recipient recalculates the payment amount when preparing the electronic statement for direct debit payments for the next calendar month.

2.2. Processing and verification of the electronic statement by the receiving bank

2.2.1. The receiving bank checks the payment details in the submitted electronic statement for direct debit payments, forms a batch of Electronic Payment Documents (hereinafter EPD) in accordance with the System formats, and transfers the EPD to the System no earlier than 3 (three) clearing days before and no later than the date corresponding to the processing date.

(As amended by Resolution of the Board of the National Bank of the Kyrgyz Republic dated November 24, 2021 No. 2021-P-14/64-6)

2.2.2. In case of improper filling, the electronic statement is returned by the receiving bank to the recipient for correction. After making corrections, the recipient re-forms an electronic statement of the corresponding format and sends it to the receiving bank.

2.2.3. The receiving bank forms payment documents for direct debit payments in accordance with the Format Filling Rules and sends them to the System according to the clearing day schedule.

(As amended by Resolution of the Board of the National Bank of the Kyrgyz Republic dated June 14, 2017 No. 2017-P-19/24-8)

2.2.4. The receiving bank, upon discovering errors, executes a refund/cancellation of the payment in accordance with the clearing day schedule and System formats, by canceling a batch or an individual payment previously transferred to the System. The refund of erroneous EPD for direct debit payments is executed no later than the end of the "Exchange Period", on the payment settlement date. The receiving bank bears responsibility for the timely refund/cancellation of payment documents for direct debit payments.

(As amended by Resolution of the Board of the National Bank of the Kyrgyz Republic dated November 24, 2021 No. 2021-P-14/64-6)

2.3. Processing of EPD by the System, transfer of payment batches to the paying bank and receiving bank

2.3.1. The System checks a batch of direct debit payments for compliance with the Format Filling Rules.

(As amended by Resolution of the Board of the National Bank of the Kyrgyz Republic dated November 24, 2021 No. 2021-P-14/64-6)

2.3.2. Payment documents for direct debit payments containing errors are rejected by the System with the corresponding message about the result of their processing sent to the receiving bank.

2.3.3. After checking batches of payment documents for direct debit payments, the System stores them until the processing date.

(As amended by Resolution of the Board of the National Bank of the Kyrgyz Republic dated November 24, 2021 No. 2021-P-14/64-6)

2.3.4. When the receiving bank refunds/cancels payment documents for direct debit payments, the System sends a corresponding message to the receiving bank.

2.4. Processing of payment batches on the processing date

2.4.1. On the processing date, the System transfers batches of payment documents for direct debit payments to the paying bank.

(As amended by Resolution of the Board of the National Bank of the Kyrgyz Republic dated November 24, 2021 No. 2021-P-14/64-6)

2.4.2. On the processing date, the paying bank receives a batch of EPD for direct debit payments from the System and checks it for correctness of indicated details and availability of funds in the payer's bank account.

(As amended by Resolution of the Board of the National Bank of the Kyrgyz Republic dated November 24, 2021 No. 2021-P-14/64-6)

2.4.3. In case of incorrectly indicated details or insufficient funds in the payer's account, the paying bank forms a batch of the corresponding format for refusal of direct debit payments presented to the payer's bank account. Refusal of direct debit payments may be sent to the System by the paying bank according to the clearing day schedule, within a period starting from the day following the processing date of the payment up to and including the settlement date.

(As amended by Resolution of the Board of the National Bank of the Kyrgyz Republic dated November 24, 2021 No. 2021-P-14/64-6)

2.4.4. Refusals for payment of direct debit payment documents received from the paying bank are processed in the System, and a corresponding notification is sent to the receiving bank.

2.4.5. The paying bank bears responsibility for the correctness and timeliness of forming EPD for refusal of direct debit payments.

2.4.6. Starting from the processing date, payment documents for direct debit payments are included in the calculation of preliminary net positions of the paying bank to inform about upcoming payments.

2.5. Processing of payment batches on the settlement date

2.5.1. On the settlement date, the System includes direct debit payments in the calculation of final net positions and sends messages to the receiving bank and paying bank regarding batch status, payment schedule, and net position of the receiving bank and paying bank.

2.5.2. The paying bank debits funds from the payer's bank account and, based on the received direct debit payment from the System, prints a payment order in the established format as the basis for debiting funds from the payer's bank account.

2.5.3. The receiving bank, based on the information received from the System, credits funds to the recipient's bank account and sends a statement of credited funds for direct debit payments to the recipient. If the exchange of payment documents between the receiving bank and the recipient is carried out in electronic form, the receiving bank forms and transmits an electronic message to the recipient based on the received EPD batch from the system.

(As amended by Resolution of the Board of the National Bank of the Kyrgyz Republic dated November 24, 2021 No. 2021-P-14/64-6)

2.5.4. The recipient, based on the received information (in electronic form or on paper media) regarding direct debit payments credited to its bank account, accounts for and stores data on service payments by payers (subscribers) in accordance with the legislation of the Kyrgyz Republic.

3. Relationships between the System and the Recipient in Direct Debit Payments

3.1. For direct debit payments, the National Bank registers recipients in the System by assigning a unique number - the sub-participant code of the System. After registration, the recipient has the authority to initiate and send payment documents for direct debit payments through the receiving bank to the System.

3.2. Registration of the recipient in the System is carried out upon request by the receiving bank based on a concluded contract between the receiving bank and the recipient regarding the use of direct debit payment services.

3.3. A directory is created in the System, where each recipient account is assigned a corresponding sub-participant code. For each direct debit payment recipient, a directory is entered into the System, which is available to all commercial banks participating in the System.

3.4. The recipient and receiving bank bear responsibility for the presence and correctness of sub-participant codes in payment documents for direct debit payments. Verification of the presence and correctness of sub-participant codes is carried out in the System, and if the sub-participant code is missing and/or does not correspond to its account registered in the System, the payment document for direct debit payments is rejected by the System and returned to the receiving bank.

3.5. The National Bank maintains a list of recipients registered in the System and having sub-participant codes, which is published in the official publications of the National Bank on a regular periodic basis.

(As amended by Resolution of the Board of the National Bank of the Kyrgyz Republic dated November 24, 2021 No. 2021-P-14/64-6)

4. Relationships between the Payer and the Recipient in Direct Debit Payments

4.1. To pay for services by processing direct debit payments, the payer prepares an Order in accordance with Appendix 1, which is an integral part of these Rules, and certifies it at the paying bank. The original Order is sent to the recipient, and its copy is kept by the payer.

4.2. The payer in the Order provided to the recipient may specify the advance notice period (invoice/receipt), the presentation period for direct debit payment orders to their bank account, the maximum amount of one payment, and the validity period of this Order, which is established at the discretion of the payer. In the absence of a specified validity period, such Order is considered indefinite and its action may be terminated by submitting an application in arbitrary form to the recipient for termination. The application for termination of the Order takes effect from the moment it is received by the recipient.

4.3. In case the payer intends to pay for services provided to another subscriber (the payer and subscriber are different persons), full details of the subscriber, for whom payment will be made from the payer's account via direct debit payments, are indicated in the Order. At the same time, the recipient may establish additional conditions regarding the list of required documents and their processing procedure. The recipient informs subscribers about such additional conditions.

4.4. The payer's Order, properly executed and certified by the paying bank, is sent to the recipient and takes effect from the moment it is received by the recipient.

4.5. The recipient, according to a service provision contract between the recipient and the payer (subscriber), sends an invoice/receipt for services rendered to the payer (subscriber) within the periods established by this contract.

4.6. Upon changes in bank details, the payer properly prepares (Appendix 1) a new Order and transfers it to the recipient. The recipient accepts this Order and follows the specified new details from the moment of receipt.

4.7. In case the recipient and/or payer decide to terminate payment for services by processing direct debit payments, an official letter of notification/application for termination of this type of payment is sent by the recipient/payer no later than one calendar month (30 days) in advance. At the same time, a copy of the payer's application for termination of payment services by direct debit payments, sent to the recipient, is forwarded to the paying bank. Receipt of the application copy by the paying bank serves as grounds for refusing payment of direct debit payment documents from the payer's bank account after the expiration of the 30-day period.

4.8. The procedure and methods for resolving disputes between the payer and recipient are established by a service provision contract between them. In case of inability to resolve disputes through negotiations, the parties, after implementing the pre-trial dispute resolution procedure provided by legislation, submit them to the judicial bodies of the Kyrgyz Republic.

5. Relationships between the Recipient and the Receiving Bank in Direct Debit Payments

5.1. The recipient and receiving bank determine the conditions for direct debit payments in a contract between them regarding the opening and maintenance of the recipient's bank account and/or an addendum to it regarding direct debit payment service conditions.

5.2. The main issues to be determined in a contract between the recipient and receiving bank regarding opening/maintenance of the recipient's bank account and/or an addendum to it regarding direct debit payment service conditions are as follows:

• minimum number of days before the settlement date by which the electronic statement must be sent by the recipient to the receiving bank;

• notification/information to the recipient regarding sending payment documents for direct debit payments to the System by the receiving bank;

• notification/information to the recipient by the receiving bank regarding acceptance by the System and transfer to the paying bank of all payment documents for direct debit payments;

• size of commissions charged by the receiving bank and the procedure for their payment by the recipient.

5.3. A contract between the recipient and receiving bank regarding opening/maintenance of the recipient's bank account and/or an addendum to it regarding direct debit payment service conditions also defines the procedure for providing information on refusals/refunds of direct debit payments and other issues regarding mutual obligations.

5.4. The recipient ensures proper accounting for direct debit payments and/or refusals thereof, and carries out storage and archiving of documents serving as the basis for direct debit payments in accordance with the legislation of the Kyrgyz Republic.

5.5. The recipient prepares and sends to the receiving bank an electronic statement, filled in accordance with established requirements, for presentation of direct debit payments to the payer's bank account within periods determined by a contract between the recipient and receiving bank.

5.6. The receiving bank credits funds to the recipient's account upon payment of direct debit payments within periods established between the recipient and receiving bank. Upon receipt of a refusal for direct debit payments, the receiving bank sends a notification to the recipient within periods according to a contract between them.

5.7. The recipient, after the expiration of the 30-day period from receiving the payer's application for termination of the direct debit payment order, stops preparing and transmitting to the receiving bank an electronic statement for payments from the bank account of that payer.

5.8. The rights and obligations of the recipient and receiving bank in direct debit payments are established by a contract for opening/maintaining the recipient's account, and/or an addendum to it regarding direct debit services, and/or a contract for providing direct debit services, and arise from the moment of its conclusion.

5.9. The procedure and methods for resolving disputes between the recipient and receiving bank are established by a contract between them and/or an addendum to the contract for opening/maintaining the recipient's account. In case of inability to resolve disputes through negotiations, the parties, after implementing the pre-trial dispute resolution procedure provided by legislation, submit them to the judicial bodies of the Kyrgyz Republic.

6. Relationships between the Receiving Bank and the System in Direct Debit Payments

6.1. The receiving bank, based on the electronic statement submitted by the recipient, forms and sends a batch of EPD for direct debit payments through the System for settlement at the paying bank.

(As amended by Resolution of the Board of the National Bank of the Kyrgyz Republic dated November 24, 2021 No. 2021-P-14/64-6)

6.2. The System verifies the correctness of formatting payment documents for direct debit payments according to requirements established in the Format Filling Rules, including correctness of the receiving bank code and sub-participant code.