Govt to have a say in new payments regulatory board with a significant role

Business Standard

22-05-2025

In a major overhaul of the payments ecosystem, the Centre has notified the 'Payments Regulatory Board Regulations, 2025' to pave the way for a new Payments Regulatory Board (PRB) which will have significant representation from the government, and replace the Board for Regulation and Supervision of Payment and Settlement System (BPSS).
The BPSS is a committee of the central board of the Reserve Bank of India (RBI) that exercises powers on its behalf, to regulate and supervise the payment and settlement systems in the country. The new regulatory entity, PRB, will be assisted by the Department of Payment and Settlement Systems (DPSS), a department in the RBI.
According to a notification published on May 21, the composition of the Board will be in accordance with Section 3 of the Payment and Settlement Systems Act (PSS), 2007. Along with the RBI governor, who will be the Chairperson, the RBI Deputy Governor in charge of payment and settlement systems, and an RBI officer nominated by its central board, the Board will include three members nominated by the central government.
Additionally, the PRB may invite persons with experience in the fields of payment and settlement systems, information technology, law, etc., to attend its meeting either as permanent or as ad hoc invitees, with the principal legal adviser of the RBI to be a permanent invitee.
'As I see it, there will be three nominees from the government and three from the RBI, with the governor having a casting vote. With this shift, the government will also have a significant role in the payment ecosystem. The industry will have to see if it appoints secretaries or independent experts from outside,' an industry executive with the knowledge of the matter said.
Under the extant BPSS structure, the RBI governor is the chairperson of the board, that also includes a deputy governor, not more than three directors of the central board nominated by the RBI governor, two executive directors nominated by the governor, as well as the RBI's legal adviser.
The notification states that the PRB may delegate any or all its powers or functions to the Chairperson of the board, or a member of the board, or a sub-committee of the board, or officers of RBI as it may deem fit and necessary for the efficient administration of the functions of the board.
The PRB is required to meet at least twice in a year, and the meetings will be presided over by the chairperson or in his absence, by the deputy governor. The notification states that each member of the board will have one vote, and any item of business requires voting, then such an item will be decided by a majority of votes. In the event of an equality of votes, the chairperson, or in his absence, the Deputy Governor, will have a second or casting vote.
In 2017, an inter-ministerial committee for finalising amendments to the PSS Act, 2007, had recommended, in a draft report, the creation of an independent regulator PRB to deal with payments related issues, with the chairperson appointed by the government in consultation with the RBI.
Consequently, RBI in a strongly-worded dissent note said there is no case for having a regulator for payment systems outside the central bank. According to the RBI's dissent note in October 2018, PRB should be headed by the RBI governor, with the government nominating three members to the board, and a casting vote for the governor. 'The overarching impact of monetary policy on payment and settlement systems and vice versa provides support for regulation of payment systems to be with the monetary authority," the dissent note had stated.
According to the notification published on Wednesday, the nominated members on the new board cannot be above 70 years of age; a member of parliament or any state legislature; have material conflict of interest with any other payment system and are unable to resolve such conflict, among other things.
'The composition of the board would have members from areas such as technology and payments systems. This implies that the board may want to look at the ecosystem from a holistic perspective by adding more members who may not directly be regulators,' an industry executive said.
'This board was under discussion. There is a fintech department, then there is DPSS, and other things. This new board may sit above everything else so that there are common standards in place to coordinate things,' a senior industry executive said.