PAYMENT AND SETTLEMENT SYSTEMS

Payment and settlement systems play an important role in improving overall economic efficiency. They consist of all the diverse arrangements that we use to systematically transfer money-currency, paper instruments such as cheques, and various electronic channels.

Overview

  • The central bank of any country is usually the driving force in the development of national payment systems. The Reserve Bank of India as the central bank of India has been playing this developmental role and has taken several initiatives for Safe, Secure, Sound, Efficient, Accessible and Authorised payment systems in the country. The Board for Regulation and Supervision of Payment and Settlement Systems (BPSS), a sub-committee of the Central Board of the Reserve Bank of India is the highest policy making body on payment systems in the country. The BPSS is empowered for authorising, prescribing policies and setting standards for regulating and supervising all the payment and settlement systems in the country. The Department of Payment and Settlement Systems of the Reserve Bank of India serves as the Secretariat to the Board and executes its directions. In India, the payment and settlement systems are regulated by the Payment and Settlement Systems Act, 2007 (PSS Act) which was legislated in December 2007. The PSS Act as well as the Payment and Settlement System Regulations, 2008 framed thereunder came into effect from August 12, 2008. In terms of Section 4 of the PSS Act, no person other than the Reserve Bank of India (RBI) can commence or operate a payment system in India unless authorised by RBI. The Reserve Bank has since authorised various types of payment system operators, viz., financial market infrastructures (enabling Securities, Repo, Forex, Rupee/Forex Derivatives settlements), retail payments organisation (operating ATM Switch, faster retail payment systems, cheque clearing, automated clearing, Aadhaar-based payments, toll collection, etc.), card payment networks, cross border inbound money transfer entities, Automated Teller Machine (ATM) networks, white label ATM operators, Prepaid Payment Instrument (PPI) issuers, instant money transfer service provider, Trade Receivables Discounting System (TReDS) operators, Bharat Bill Payment Central Unit (BBPCU) and Bharat Bill Payment Operating Units (BBPOU).
  • A framework for recognition of a Self-Regulatory Organisation (SRO) for Payment System Operators has been put in place in October 2020 with a view to fostering best practices on security, customer protection and pricing, among others. The SRO will serve as a two-way communication channel between the players and the regulator/supervisor.
  • A list of Payment System Operators (PSO) authorised by the Reserve Bank of India to set up and operate a payment system in India under the Payment and Settlement Systems Act, 2007 is available here.

Digital Payments

Paper-based / Cash Payments

Other Payment Systems / Services

Board for Regulation and Supervision of Payment and Settlement Systems (BPSS)


Oversight of Payment and Settlement Systems

Oversight of the payment and settlement systems is a central bank function whereby the objectives of safety and efficiency are promoted by monitoring existing and planned systems, assessing them against these objectives and, where necessary, inducing change. By overseeing payment and settlement systems, central banks help to maintain systemic stability and reduce systemic risk, and to maintain public confidence in payment and settlement systems. The Payment and Settlement Systems Act, 2007 and the Payment and Settlement Systems Regulations, 2008 framed thereunder, provide the necessary statutory backing to the Reserve Bank of India for undertaking the Oversight function over the payment and settlement systems in the country.



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