A panel appointed by the government has made proposals for changes to the RBV (Reserve Bank of India) guidelines for payment and settlement systems The Economic Times.
The list of recommendations includes the establishment of an independent regulatory commission for payments (PRB) and replacement of the president of the central bank by a chairman appointed by the government in consultation with RBI.
The government panel has listed these suggestions in a legislative proposal to replace the existing law on payment and settlement systems.
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"The bill states that the PRB is an independent payment regulator and provides that the RBI has an important representation in the PRB and provides a formal mechanism for coordination between the RBI and the PRB, so that the regulation of payments, as far as relevant in the the context of financial stability, monetary policy and credit policy is possible, is achieved in a harmonious manner, "said the committee.
However, the recommendations were not in line with the RBI proposal. The central bank has previously proposed that the president of the PRB should come from RBI and have a deciding vote.
To meet the concerns of RBI, the committee said that the bill provides that the chairman of the PRB has experience with central banking functions.
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"To further address RBI's concerns, the committee included section 10 in the bill to give RBI the power to make a reference to the PRB to consider any issue that, in the RBI's view, is important was in the context of monetary policy, "it said.
According to the draft law, the PRB can make a reference to the RBI if it proposes a certain system for the payment system and the central bank can give its opinion in this respect.
"If PRB disagrees with the opinion of RBI and RBI does not agree with the PRB's reasons, the RBI may also make a reference to the central government," he said.
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Although the RBI stressed that the central bank is the regulator of payment systems in many countries, the commission considered that countries such as the UK and Australia have multiple regulators with simultaneous jurisdiction over payment systems.
The central bank disagreed with the recommendations of the panel to provide public or government with at least 51 percent share holdings of entities such as the National Payments Corporation of India (NCPI) and central government nominees in their boards.
The panel also proposed that the central government should have the power to appoint two candidate directors to the boards of directors of PRB.
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A committee led by secretary for economic affairs, Subhash Garg, looked at the bill, discussed detailed discussions with its members and submitted an updated version of the bill. This committee consists of government and RBI officials.
The updated legislative proposal aims to promote competition, provide consumer protection and system stability and resilience, and establish an independent regulator for the payment industry, including non-banks as key players, and consolidate and adjust the payments legislation. .
The committee recommended that the proposed bill should be submitted for consideration to the EU cabinet.
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The Payment and Settlement Systems Act (PSS), 2007, is the first special law for regulating and controlling payment systems in India, such as the National Electronics Funds Transfer system, the Real Time Gross Settlement System and ATM and card transactions.