Need For Proposed Payment Regulatory Board: Explained

Need For Proposed Payment Regulatory Board: Explained

Background

  • The Payment Regulatory Board (independent of RBI) was proposed by Ratan Watal committee to promote competition & innovation in the payment network in India. 
  • At present, Board for Regulation & Supervision of Payment & Settlement systems supervises the payment network in India. 
  • Latest Budget has suggested that the Payment Regulatory Board to setup in the RBI consisting of 6 members. 
              (i) Three members from RBI & Three outside members selected by the Centre. 
              (ii) The chairman of the board will be RBI Governor. 
              (iii) Deputy Governor of RBI in charge of Payments & Settlements will also be a member. 

Need of the proposal

  • The Payment & Settlement Systems Act 2007 (PSS Act) constrains the reach of digital payments, thus supporting the cash proposals. 
  • It is Silent on data protection issues. 
  • Committee also states that the present law does not concentrate on supporting competition in the payments sector. 
  • Payment system is a more Technology- Business focused activity, which should be observed independently from the banking sector. 

Importance of the proposal

  • It is visualized that an independent body concentrated on the goal to enable digital payments would increase the digital payments from the current 5% to about 20% in three years. 

Board for Regulation and Supervision of Payment and Settlement System 

  • It is a sub-committee of the Central Board of the RBI. 
  • It is the top policy making organization on payment systems. 
  • It has the power to approve, recommend policies & set standards to control & supervise all the payment & settlement systems in the country. 
  • It is a constitutional body set as per the Payment & Settlements Act 2007. 

Few Recommendations of ‘Ratan Watal’ Committee:-

  •  A moderate term strategy for accelerating growth of Digital payments in India is required. 
  • The strategy should be backed with regulatory system which is favorable in bridging the Digital divide by supporting competition & open access in payments. 
  • Better use of Aadhar & mobile numbers for creating digital payments as easy as cash. This is needed besides, the enhanced digital security. 
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