‘No need for regulator for payment systems outside central bank’

MUMBAI/NEW DELHI: The Reserve Bank of India (RBI) on Friday said there is no case for having a regulator for payment systems outside the central bank. RBI has submitted a dissent note, released on Friday, against certain recommendations of the inter-ministerial committee for finalization of amendments to the Payment & Settlement Systems Act, 2007.

An inter-ministerial panel set up to finalize the Payment and Settlement System (PSS) Act had recommended that the payments regulator should be an independent regulator with the chairperson appointed by the government in consultation with RBI. This has been opposed by the central bank, which wants the chairperson to be from the central bank with a casting vote, the note said.

An independent payments regulatory board (PRB) needs to be established to regulate the payments sector aimed at fostering competition, consumer protection, systemic stability and resilience in the payments sector, said the draft Payment and Settlement System Bill, 2018, submitted by the committee to finalize the amendments to the Payment and Settlement Act, 2007.

However, according to RBI’S dissent note, the central bank believes that the PRB must remain with the central bank and headed by the RBI governor. RBI and the government may nominate three members each to the board, with a casting vote for the governor, RBI said.

RBI cited the report of the Ratan Watal Committee on digital payments as recommending the establishment of the PRB within the overall structure of RBI, arguing therefore that there is no need for any deviation.

“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,” said RBI.

The central bank said that as payment systems are a sub-set of currency, which is regulated by it, the impact of monetary policy provides support for regulation of payment systems to be with the monetary authority. “There is an underlying bank account for payment systems under the purview of banking system regulation which is vested with RBI. Settlement systems are finally posted in the books of account of banks with RBI to attain settlement finality,” it said.