The Payment and Settlement System Act, 2007
- The Payment and Settlement System (PSS) Act, 2007 came into force with effect from 12th August, 2008. It was received the assent of the President on 20th December, 2007.
- Control and supervise the payment system and determine the authority of the Reserve Bank of India (RBI).
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.
- The Board for Regulation and Supervision of Payment and Settlement Systems Regulation, 2008.
Board for Regulation and Supervision of Payment and Settlement System (BPSS):
The Board of Directors of the Central Board of Reserve Bank has been constituted. Applying powers to the Reserve Bank of India under the control and supervision of BPSS.
- Licence of opening a payment system : Only RBI can operate or commerce a payment system. Unauthorized operation of a payment system by any person is an offence liable for penal action.
- Application fee for authorization : Rs. 10, 000. The period for the disposal of application by RBI is 6 months from the date of their receipt.
- Revocation of authorization granted : The Reserve Bank of India can cancel the sanction of the bank, if the system provider violates the provisions of the law or regulation, it is allowed under which the terms and conditions cannot be complied with.
The abusive system providers may appeal to the abusive applicant within 30 days of the date indicated by the central government.
- Authorization fees and security deposit – The Act empowers RBI to collect authorization fees while granting authorization.
- Standards – The Reserve Bank of India may determine the format, size and instructions of the banks, the size of the funds, the transfer of funds, the membership structure etc.
- Returns and information – RBI can call returns, documents and other information.
- Inspection – The Reserve Bank of India may approach an officer in the premium where payment system is being handled, any computer system or document with which to test the equipment.
- Issue of directions – The Reserve Bank of India is authorized to issue a payment system or system and the instructions of the general guidelines are issued.
- Mechanism for settlement of disputes – Where disputes arise between system participants and system providers or system providers, such debates need to be referred to the Reserve Bank of India for trial. In cases where the Reserve Bank is a system partner or system provider, a team of its power debate, these cases will be referred to the central government for trial.
- Consequences of dishonor of electronic fund transfer (section 25) – Dishonor 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 dishonor of a cheque under Negotiable Instruments Act 1881.
- Penalties or punitive action – Under the Act, RBI can initiate criminal prosecution and also impose fine for certain contraventions.
- Netting and settlement finality – The PSS Act 2007 said that such kind of financing will determine the penalty, securities, foreign currency or other derivative or other transactions, such as money, securities or foreign exchange or in spite of not being a settlement, final and unforeseen. Other transactions are actually given.