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Informist, Wednesday, May 7, 2025

--Govt notifies Payments Regulatory Board to come into force from Fri

--CONTEXT:RBI to wield payment-settlement law via Payments Regulatory Board

NEW DELHI – The government on Tuesday notified that the Payments Regulatory Board will come into force from Friday, more than eight years after the body was mooted by the Union Budget for 2017-18 (Apr-Mar) to replace the Reserve Bank of India's Board for Regulation and Supervision of Payment and Settlement Systems.

"In exercise of the powers conferred by section 151 of the Finance Act, 2017 (7 of 2017), the Central Government hereby appoints the 9th day of May, 2025 as the date on which sections 152 and 153 of the said Act, relating to amendments in the Payment and Settlement Systems Act, 2007 (51 of 2007), shall come into force," a government notification dated May 6 said.

Amendments to the Payment and Settlement Systems Act, 2007 mentioned in sections 152 and 153 of the Finance Act, 2017, name the Payments Regulatory Board as the designated authority for the payments law, with the RBI exercising the powers, performing the functions, and discharging the duties conferred on it by the payments law through the Payments Regulatory Board.

The board will comprise six members – the RBI governor as the chairperson, the deputy governor in charge of the payment and settlement systems, one officer of the central bank nominated by its own board, and three other persons nominated by the central government. Currently, Deputy Governor T. Rabi Sankar is in charge of the Department of Payment and Settlement Systems.

The Payments Regulatory Board had been a bone of contention between the government and the RBI, with the Inter-Ministerial Committee for Finalisation of Amendments of the Payment and Settlement Systems Act, 2007--headed by the then economic affairs secretary Subhash Chandra Garg--saying in its report in August 2018 that an independent body to oversee payments and settlement should be formed with "significant representation" from the RBI. The committee had recommended a seven-member body headed by a person appointed by the government in consultation with the central bank.

However, the RBI took issue with the committee's recommendations and issued a dissent note in October 2018, arguing that "there is no case of having a regulator for payment systems outside the RBI", and pointing out that the composition of the board recommended by the Inter-Ministerial Committee "is not in conformity with the announcements made in the Finance Bill by the Finance Minister".

"It may be mentioned that RBI does welcome changes and is not totally against a new PSS Bill if indeed required. It has to be, however, recognised that changes should not result in existing foundations being shaken and the potential creation of disturbances in an otherwise well-functioning and internationally acclaimed structure as far as India is concerned," the RBI's dissent note had said. S. Ganesh Kumar, the then executive director at the RBI, was a member of the committee.  End

Reported by Siddharth Upasani

Edited by Tanima Banerjee

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