Reserve Bank of India has issued a dissent notice on the Inter-Ministerial Committee for finalization of Amendments to the Payment and Settlement System (PSS) Act, 2007. In the dissent notice, it critically opposed the idea of constituting an independent body for regulating payments.
The Committee was formed by the Government under the chairmanship of Secretary, Department of Economic Affairs. RBI was represented in the Committee. The Draft report of the Committee has been placed in the public domain by the Government. In the draft report, the committee suggested the creation of an independent body who would regulate payments.
RBI rejected the recommendations of the committee through a dissent note, stating, “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 the regulation of payment systems to be with the monetary authority.”
It also contented in the note, “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.”
The Central Bank further stated in the notice that the regulation and supervision over Payment and Settlement systems will ensure holistic benefits.
RBI staging its dissent, further stated that “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.”
It further said that the Payments Regulatory Board (PRB) must remain with the Reserve Bank and headed by the Governor of 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.
Read the note here: https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=45287