The Payment and Settlement Systems (PSS) Act, 2007 empowers the Reserve Bank of India (RBI) to regulate and supervise payment and settlement systems in India. To exercise these powers, the RBI operates through its designated body, the Payments Regulatory Board (PRB).
These powers enable the RBI to authorize operators, prescribe standards, conduct inspections, impose penalties, and issue regulations to maintain the integrity, security, and efficiency of the payment ecosystem.
Key Powers of the RBI under the PSS Act
1. Authorization
• RBI has the authority to grant or deny authorization to entities seeking to operate payment systems.
• Ensures that only eligible, trustworthy, and capable operators are permitted.
2. Prescribing Standards
• RBI can prescribe technical, operational, and security standards for payment systems.
• Promotes uniformity, interoperability, and system integrity across operators.
3. Inspection and Supervision
• RBI may inspect and supervise payment systems, ensuring compliance with the law.
• It can direct corrective actions if customer interests or financial stability are at risk.
4. Penalties
• RBI is empowered to levy monetary penalties on entities that violate provisions of the Act or regulations.
5. Compounding of Offences
• For certain offences (not involving imprisonment), the RBI can compound them, i.e., settle them outside of court.
6. Constitution of Payments Regulatory Board (PRB)
• The PSS Act authorizes the RBI to establish the Payments Regulatory Board (PRB) as the supervisory authority for payment systems.
• The PRB was formally constituted in May 2025 following amendments to the Act.
Regulatory Framework
The RBI exercises its regulatory powers through the Payments Regulatory Board (PRB). The framework is further supported by the PSS Regulations, 2008, which may be amended by the RBI to reduce compliance burden and enhance efficiency.
Summary Table – Powers of RBI under the PSS Act
| Power | Scope / Significance |
| Authorization | Controls entry of payment system operators; ensures reliability and trustworthiness. |
| Prescribing Standards | Sets technical, operational, and security benchmarks for integrity and interoperability. |
| Inspection & Supervision | Allows RBI to oversee systems, enforce compliance, and protect customer interests. |
| Penalties | Enables deterrence against violations through monetary sanctions. |
| Compounding of Offences | Provides for out-of-court settlement of minor/non-imprisonable offences. |
| Constitution of PRB | Establishes a dedicated body to regulate and supervise payment systems effectively. |
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