The Reserve Bank of India (RBI) has submitted a dissent note on certain recommendations by an inter-ministerial committee for finalisation of amendments to the Payment & Settlement Systems (PSS) Act, 2007.

"RBI does welcome changes and is not totally against a new PSS Bill if indeed required," it said.

It has to be, however, recognised that changes should not result in existing foundations being shaken and the potential creation of disturbances in an otherwise well-functioning and internationally acclaimed structure as far as India is concerned, RBI said.

The government-appointed committee batted for sweeping changes to the legal framework governing payments and settlements. The panel had proposed the creation of an independent Payments Regulatory Board (PRB) and suggested replacing the central bank governor as chairperson with a person appointed by the government in consultation with RBI.

The committee was formed by the government under the chairmanship of secretary, department of economic affairs. The RBI was also a part of the committee.

Here Is The Dissent Note BY RBI:-

Payment systems are a sub-set of currency which is regulated by the RBI. The overarching impact of monetary policy on payment and settlement systems and vice versa provides support for the regulation of payment systems to be with the monetary authority.

There is an underlying bank account for payment systems which is 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. Regulating these entities goes hand in hand with the settlement function.

There are certain payment systems like cards which are issued by banks globally. Dual regulation over such instruments will not be desirable.

In India, the payment system is bank-dominated. Regulation of the banking systems and payment system by the same regulator provides synergy and inspires public confidence in the payment instruments.

Regulation of the payment system by the central bank is the dominant international model for stability consideration. Thus, having the regulation and supervision over payment and settlement systems with RBI will ensure holistic benefits.

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.

The Payments Regulatory Board (PRB) must remain with the central bank and headed by the RBI governor. It may comprise three members nominated by the government and RBI respectively, with a casting vote for the governor to ensure smooth operations of the board. The compensation of the PRB is also not in conformity with the announcements made in the finance bill by the finance minister.

First Published:Oct 19, 2018 6:10 PM IST