A Debate Over Proposed Payment Regulatory Board, As Opposed By RBI.
Post on 01,September 2017   4:00 AM
By - PolyEyes Staff
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Ratan Watal committee has given its recommendations of a new Payment Regulatory Board and related payment regime in India which is definitely not in synchronization with RBI’s opinion. The committee has recommended constituting a Payment Regulatory Board (independent of RBI) to promote competition and innovation in the payment ecosystem in India.

Currently it is overlooked by Board for Regulation and Supervision of Payment and Settlement Systems which supervises the entire payment system. 2017-2018 Budget had recommended that Payment Regulatory Board would be setup in the RBI with 6 members: 3 from RBI whereas 3 external members would be nominated from the center, under the chairmanship of RBI governor. Deputy RBI Governor who is in charge of Payments and settlements would also be a member.

What is Board for Regulation and Supervision of Payment and Settlement Systems? It is a statutory body set as per Payment and Settlements systems Act 2007 and a sub- committee of the Central Board of the RBI .It is the highest policy making body on payment systems and empowered to authorize, prescribe policies and set standards to regulate and supervise all the payment and settlement systems in the country. It secretariat is at the Department of Payment and Settlement Systems of RBI.

Why did committee propose the new Payment Regulatory Board? Present Payment and Settlement Systems Act 2007 (PSS Act) restricts the reach of digital payments, thus promoting cash transactions. As it doesn’t speak anything about data protection issues. Committee also put forth the issue that the present legal scenario does not focus on promoting competition in the payments sector. Moreover the concept and related functions of payment regime is a more technology-business driven activity that should be viewed independently from the banking sector. With a new and separate board, it is perceived that an independent body will focus facilitating digital payments which in return would increase the digital payments from the current 5% to about 20% in 3 years.

Then why RBI is opposing it? Making it a new and entirely separate body it will challenge RBI’s autonomy as already Monetary Policy Committee (MPC) is constituted to set inflation targets. Banking is not much different from payments systems because non cash payments require the existence of financial intermediaries like banks. Therefore separating both of them may create problems in coordination. Also already existing Board for Regulation and Supervision of Payment and Settlement Systems is sufficient and relatively independent. This Board also has membership of experts who are non-RBI members. Too many separate laws and further claiming it within PSS Act can lead to overlapping jurisdictions. Defining what would constitute “an innovation” would be difficult for the Payment Regulatory Board.

Conclusion: A separate board might be the need of hour but the jurisdiction between the eminent boards and bodies should be well-defined, structured and clear in approach. The cashless economy needs to be boasted and therefore it needs to be guided along by emphasizing more upon its execution.

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