New Delhi: The Payment and Settlement Systems Act, 2007 should be replaced by an updated law, according to the report of the Watal Committee, set up by the government to overhaul the digital payments infrastructure.
The amendment bill to legislate the Act will be finalized and presented before the cabinet in the next 30 days.
As reported by Mint earlier, the Committee headed by former finance secretary Ratan Watal also recommends a number of regulatory changes along with those to the primary legislation.
It has suggested two options for regulating digital payments—either create an independent payments regulator within the framework of the Reserve Bank of India (RBI) or make the RBI’s Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) more independent. The committee had recommended giving independent status to BPSS, to be called the Payments Regulatory Board (PRB), the structure of which will be finalized in the next 30 days.
Apart from this, it had also suggested interoperability between banks and non-bank digital payment gateways/entities as well as within non-banks. National Payments Corp. of India (NPCI) has been asked to enable this on its platform over the next 60 days.
The other major suggestions have been withdrawal of all charges on digital-based transactions by the government, with special emphasis on low-value transactions (that are mainly financed by cash). One option is for telecom companies being permitted to roll out a direct carrier billing (DCB) payment model for these transactions.
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DCB is a mobile payment option that lets users download and purchase digital content like games, movies, music, eBooks, apps, etc. from the Google Play Store and charge it to the users’ prepaid balance or add it to their postpaid bill.
RBI has also been asked to upgrade the existing real-time gross settlement system (RTGS) and National Electronic Funds Transfer (NEFT) systems so that they operate on a 24/7 basis.
The committee has called for mandating government departments and agencies to provide options to consumers to pay digitally as well as incentivize consumers to make payments (including payment of fines and penalties) to the government electronically by giving a discount or cashback. Apart from this it also recommended rewards for government departments, state governments, districts and Panchayats for enabling digital payments.
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The use of Aadhaar eKYC(know-your-customer) and Aadhaar-enabled Payments System (AEPS) has been encouraged by the committee.
“The Committee recognises the fact that India has one of the lowest number of point-of-sale (POS) terminal per million people in the world," said the report.
In order to address the problem, a reduction in import duty has been suggested to make POS terminals affordable for the acquiring banks.
The report has been put up by the finance ministry on its website for feedback and suggestions from the public for the next 15 days.
The 11-member panel has representatives from the RBI, Unique Identification Authority of India (UIDAI), the tax department and various industry bodies in the payments space.