THE PAYMENT & SETTLEMENT SYSTEM IN INDIA
Essential for All Upcoming Bank Exams
The Payment and Settlement Systems Act, 2007 came into force with effect from 12th August, 2008.
Regulation under the Act:
Two regulation have been made by RBI which came into force on 12th August, 2008 –
- The Payment and Settlement Systems Regulation, 2008 and
- The Board of Regulation and Supervision of Payment and Settlement Systems Regulation, 2008.
The Payment and Settlement Systems –
The central bank of any country is usually the driving force in the development of national payment systems. The Reserve Bank of India as the central bank of India has been playing this developmental role and has taken several initiatives for Safe, Secure, Sound, Efficient, Accessible and Authorized payment systems in the country.
The Board of Regulation and Supervision of Payment and Settlement Systems (BPSS), a Committee of the Central Board of Directors of Reserve Bank of India has been constituted. BPSS exercises powers on behalf of RBI for regulation and supervision.
Licence for operating a payment system:
Only RBI can operate or commence a payment system. Unauthorized operation of a payment system by any person is an offence liable for penal action.
Revocation of authorization granted:
RBI can revoke the authorization, if the system provider contravenes provisions of the Act or Regulations, fails to comply with conditions under which the authorization was granted.
Application fee for authorization:
Rs. 10,000. The period for disposal of application by RBI is 6 months from the date of their receipt.
RBI can prescribe format of payment instructions, manner of funds transfer, size and shape of instructions, criteria for membership etc.
Issue of directions:
RBI is authorized to issue directions to a payment system or system participant and general direction.
Returns and Information:
RBI can call the returns, documents and other information.
RBI can depute an officer to enter premises where a payment system is being operated, inspect any equipment, including any computer system or document.
Mechanism of settlement of disputes:
Where controversy rise between system participant and system provider or between the systems providers, such as controversy are required to be referred to RBI for adjudication. In cases where RBI, in its capacity either as system participant or system provider, is a party to the dispute, such cases are to be referred to Central Govt. for adjudication.
Penalties or punitive action:
Under the Act, RBI can initiate criminal prosecution and also impose fine for certain contraventions.
Consequences of dishonour of electronic fund transfer (Section 25):
Dishonour of EFT due to insufficiency of funds in an account, is an offence, punishable with imprisonment (up to 2 years) or with fine (up to double the amount) or both, on similar conditions as in case of dishonour of a cheque under Negotiable Instrument Act 1881.
Netting or settlement finality:
The PSS Act, 2007 states that a settlement, will be final and irrevocable as soon as the money, securities, foreign exchange or derivatives or other transactions payable as a result of such settlement, is determined, whether or not such money, securities or foreign exchange or other transactions is actually paid.