Six-member board to regulate payment systems in India, government to have a say in new Payments Regulatory Board
In October 2018, RBI had released its ‘Dissent Note’ against having a regulator for payment systems outside the central bank
New Delhi: The RBI Governor will head a six-member Payments Regulatory Board, including three central government nominees, will regulate and supervise payment systems in the country, according to a central bank notification.
The Payments Regulatory Board (PRB) will replace the Board for Regulation and Supervision of Payment and Settlement System (BPSS). The five-member BPSS is also headed by the RBI Governor but does not include any government nominee. The other members are a deputy government concerned and three directors from the Central Board of the Reserve Bank of India.
The Reserve Bank has now notified ‘Payments Regulatory Board Regulations, 2025’.
According to the notification, other members of the governor-headed Payments Regulatory Board (PRB) will be the Deputy Governor in charge of the Payment and Settlement Systems, one officer of the RBI to be nominated by the Central Board, and three persons nominated by the central government.
RBI Governor, Deputy Governor and the central bank official will function as “ex officio” members of the Board.
It further said the PRB may invite persons with experience in the fields of payment and settlement systems, information technology and law to attend its meeting either as permanent or ad hoc invitees and the Principal Legal Adviser of the RBI shall be a permanent invitee to the meetings.
The Payments Regulatory Board shall ordinarily meet at least twice a year, the notification said.
Earlier, the government had set up an inter-ministerial committee headed by the Economic Affairs secretary to finalise amendments to the Payment and Settlement Systems Act, 2007. In its draft report, the panel suggested the creation of an independent regulator Payments Regulatory Board to deal with payments-related issues.
The Reserve Bank of India, in October 2018, released its ‘Dissent Note’ on the Inter-Ministerial Committee for the finalisation of Amendments to the Payment and Settlement Systems Act, objecting to the panel’s recommendation of having a regulator for payment systems outside the RBI.
“The Payments Regulatory Board (PRB) must remain with the Reserve Bank and be headed by the Governor, Reserve Bank of India. It may comprise 3 members nominated by the Government and RBI, respectively, with a casting vote for the Governor to ensure smooth operations of the Board. The composition of the PRB is also not in conformity with the announcements made in the Finance Bill by the Honourable Finance Minister,” the RBI’s ‘Dissent Note’ had said.
According to the notification, each member of the Board shall have one vote. “All matters for approval which come up during any meeting of the Board shall be decided by a majority of votes of the Members present and voting, and in the event of an equality of votes, the Chairperson, or in his absence, the Deputy Governor, who is a Member of the Board, shall have a second or casting vote,” said the notification published on May 21 in The Gazette of India.
Commenting on the notification, Ranadurjay Talukdar, Partner and Payments Sector Leader, EY India, said: “India has never seen payments regulated outside of the RBI. RBI oversight over the years has ensured stringent governance of systemic risks arising from the payments ecosystem — setting up appropriate guardrails to protect consumer interests (such as grievance redressal and KYC guidelines) and infrastructural resilience (such as the cybersecurity framework for PSOs)”.
However, the establishment of a PRB with the right industry representation can lead to greater innovation; whether by expanding tokenisation to enable device-based payments across schemes or by introducing newer entities like NUEs (New Umbrella Entities) to balance ever-growing digital payments volumes, Talukdar said.
