Reserve Bank of India releases Dissent Note on Inter-Ministerial Committee for finalization of Amendments to PSS Act

Extract:

An Inter-Ministerial Committee for finalization of amendments to the Payment & Settlement Systems Act, 2007 was formed by the Government under the chairmanship of Secretary, Department of Economic Affairs. RBI was represented in the Committee.

             

Draft report of the Committee has been placed in public domain by the Government. RBI representative has submitted a dissent note on certain recommendations of the Committee, a copy of which is reproduced below for public information.

              Dissent Note : -

Payment systems are a sub-set of currency which is regulated by the RBI. The overarching impact of Monetary policy on payment and settlement systems and vice versa provides support for regulation of payment systems to be with the monetary authority.

There is an underlying bank account for payment systems which is under the purview of banking system regulation which is vested with the RBI.

Settlement systems are finally posted in the books of account of banks with the RBI to attain settlement finality. Regulating these entities goes hand in hand with the settlement function.

There are certain payment systems like cards which are issued by banks globally. Dual regulation over such instruments will not be desirable.

In India, the payment system is bank-dominated. Regulation of the banking systems and payment system by the same regulator provides synergy and inspires public confidence in the payment instruments.

Regulation of the Payment System by the Central Bank is the dominant international model for stability consideration. Thus, having the regulation and supervision over Payment and Settlement systems with the central bank will ensure holistic benefits.

There has been no evidence of any inefficiency in payment systems of India. The digital payments have made good and steady progress. India is gaining international recognition as a leader in payment systems. Given this, there need not be any change in a well-functioning system.

The Payments Regulatory Board (PRB) must remain with the Reserve Bank and headed by the Governor, Reserve Bank of India. It may comprise 3 members nominated by the Government and RBI respectively, with a casting vote for the Governor to ensure smooth operations of the Board.

The composition of the PRB is also not in conformity with the announcements made in the Finance Bill by the Honorable Finance Minister.

Generic comments of RBI on certain recommendations of the report can be read here.