- The Reserve Bank of India (RBI) has opposed the move to have an independent Payments Regulatory Board (PRB) as envisaged by the draft proposal for amendments to the Payment & Settlement Systems Act, 2007.
- About the Payments Regulatory Board (PRB) :
- The Union Government in Budget 2017-18 has proposed creation of a six-member Payments Regulatory Board in the Reserve Bank of India (RBI) as part of bringing structural reforms in the payment ecosystem.
- Ratan Watal committee for digital payments: It has recommended for an independent and separate entity from RBI to regulate payments and settlements system to give boost to digital payments.
- It has suggested that RBI’s regulation must be kept only for SIPS (systemically important payment system).
- Moreover the draft report of the Inter-Ministerial Committee called for an independent payments regulator, with the chairperson to be appointed by the government in consultation with RBI which arose differences between RBI and Finance Ministry.
- The RBI also opposed the panel’s recommendation to resolve payments cases through the Securities Appellate Tribunal.
- RBI’s stand:
- According to the global practice, both the SIPS and retail payment systems are under the central bank for a variety of reasons.
- For example issues of inter-connectivity between the systems and the role of the central bank as the lender of last resort (LOLR).
- RBI has mooted a monetary-policy-committee-style structure for the PRB, where outcomes are decided independently, but implementation remains with the banking regulator i.e. RBI
- The central bank also argued that payments systems are a subset of currency and predominantly controlled by banks in India.
- Since both currency and banks fall under the purview of the RBI, it argued that control of payments systems should lie with the central bank itself.
- The central bank said that objectives for the PRB should not be mandated by law, as it will lack flexibility.