PAYMENTS REGULATORY BOARD

Oct. 20, 2018

The Reserve Bank of India (RBI) has opposed the move to have an independent Payments Regulatory Board (PRB) to regulate the payments sector.

Background: SC Garg committee

In August 2018, the panel formed by the government for finalisation of amendments to the Payment & Settlement Systems Act, 2007 under economic affairs secretary SC Garg’s chairmanship submitted its report.
It recommended that the proposed Payments Regulatory Board (PRB) should be an independent regulator outside RBI’s purview.

Arguments against an independent PRB by RBI:

View of SC Garg committee is in contrast to what was proposed by Finance Minister Arun Jaitley in the Finance Act, 2017.
The Ratan Watal Committee on digital payments had recommended the establishment of the PRB within the overall structure of the RBI.
Since banks are regulated by the RBI, a holistic regulation by RBI will be more effective and not result in increased compliance costs.
There needs to be integrated operations and not co-ordination. Co-ordination is required across different but related functions, which is not the case for payment systems.
Objectives for the PRB were best avoided to be mandated by law as the law might not provide the much-needed flexibility.