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. The 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 the RBI. This has been opposed by the central bank, which wants the chairperson to be from the central bank with a casting vote, Mint in a 19 September report 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 the RBI’s dissent note, the central bank believes that the PRB must remain with the central bank and headed by the RBI governor. The RBI and the government may nominate three members each to the board, with a casting vote for the governor, the RBI said.

The RBI cited the report of the Ratan Watal Committee on digital payments as recommending the establishment of the PRB within the overall structure of the 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 the 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 the RBI. Settlement systems are finally posted in the books of account of banks with the RBI to attain settlement finality," it said, adding that regulating these entities goes hand-in-hand with the settlement function.

Certain payment systems like cards are issued by banks globally and “dual regulation over such instruments will not be desirable", said the note.

The RBI said it is not totally against a new Payment and Settlement System Bill but stressed that changes should not lead to existing foundations being shaken in a well-functioning structure.

“The recommendations of the committee are consistent with this objective. However, the governor of RBI should be the chairman of the proposed PRB as pointed out by the RBI in the dissent note as the governor would be the best person to make unbiased coordinated decisions," a top officer of a payments company said on condition of anonymity.

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