By Vishes Kothari & Simran Jalan (email@example.com)
Major reforms are being proposed to the Payments and Settlement Systems Act, 2007 so as to be able to catch up with the fast changing payments landscape in the country.
An Inter-Ministerial Committee was constituted in October, 2017 to finalise the draft bill called the Payment and Settlement System Bill, 2018 and was comprised of representatives from the RBI, UIDAI, Department of Financial Services (DFS), Department of Electronics and Information Technology (DEIT), Department of Economic Affairs (DEA) and the Department of Legal Affairs (DLA). The Committee has recently submitted its recommendations.
The committee has proposed sweeping changes in the payments sector. The formation of Payments Regulatory Board (“PRB”), an independent regulator of the payments system distinct from the central bank is perhaps the most significant. This separates the regulation of payments from the functions of the central bank, The PRB is formed with the broad objectives of consumer protection, systematic stability, and resilience. It further aims to bring about competition and innovation. Moreover the Bill proposes to put banks and non-banks at par by making authorization criteria to operate payment and settlement systems ownership neutral.
Further significant changes include the introduction of the concept of designated payment systems and infrastructure systems. Both are discussed in detail below.
The Bill has 100 sections as compared to 38 sections in the existing Payment and Settlement Systems Act, 2007 (“PSS Act”). Read more