Under the Payment and Settlement Systems Act, 2007, the Reserve Bank of India (RBI) is empowered with comprehensive regulation and supervision responsibilities over payment systems in India. Key points of RBI’s regulation and supervision include:
- Constitution of BPSS
RBI constitutes the Board for Regulation and Supervision of Payment and Settlement Systems (BPSS), a committee of its Central Board, to exercise powers and perform functions related to the Act. This board acts as the highest policymaking body for regulation and supervision of payment and settlement systems. - Authorization and Oversight
RBI exclusively authorizes any entity to commence or operate a payment system in India. It regulates the authorization process, sets conditions, and can revoke authorization if terms are violated. - Standards and Procedures
RBI determines standards for payment systems covering formats, operational timings, transfer procedures, eligibility criteria for participation, and other operational aspects to ensure smooth functioning and systemic safety. - Monitoring and Compliance
Payment system providers must regularly furnish returns, accounts, and information to RBI. RBI conducts inspections, inquiries, and audits to check compliance. - Issuance of Directions
RBI may issue directions to payment systems or participants to cease harmful acts or omissions, perform corrective actions, or take steps needed for smooth functioning or to protect public interest. - Legal Framework for Finality and Netting
RBI’s regulatory framework ensures the legal enforceability of netting and finality of settlements, reducing systemic risks in payment transactions. - Enforcement and Penalties
RBI ensures compliance with the Act’s provisions and can impose penalties for contraventions, unauthorized operations, or failure to adhere to directions.
Together, these powers and supervisory mechanisms enable RBI to maintain a safe, secure, efficient, and authorized payment ecosystem in India under the PSS Act, 2007.
