Context:
The Reserve Bank of India tightened norms for imposing monetary penalties and compounding offences under the Payment and Settlement Systems Act (PSS Act) to rationalise and consolidate enforcement action by the central bank.
Purpose of Rule Change
- Aim to Rationalize and consolidate the enforcement activities against banks and payment system operators.
Payment and Settlement Systems Act (PSS Act)
The Payment and Settlement Systems Act, 2007 is the law by which payment systems in India are regulated and supervised. The designated authority for these purposes is Reserve Bank of India RBI.
What does PSS Act?
- Regulates and supervises payment systems in India
- Designates the RBI as the authority for regulating payment systems
- Prevents any person other than the RBI to run a payment system without permission
What does RBI regulate?
- All payment systems and instruments and Services provided by banks and non-banks.
What payment systems are covered by the PSS Act?
- Real-time gross settlement (RTGS)
- Electronic Clearing Services (ECS Credit)
- Electronic Clearing Services (ECS Debit)
- Credit cards
- Debit cards
- National Electronic Fund Transfer (NEFT) system
- Immediate Payment Service
- Unified Payments Interface (UPI)
Major Infringements Under PSS Act
- Operation of a payment system without permission.
- Disclosure of restricted information without permission.
- Delay in paying the penalty within the time specified.
New Resurrected Penalty Structure
- Enhanced Maximum Penalty
- Currently 10 lakh or twice the amount involved whichever is higher.
- Earlier 5 lakh cap amended under the Jan Vishwas Act 2023 effective from January 22, 2024.
- Continuing Violations
- 25,000 per day until the violation is rectified.
- Compounding of Offences
- RBI officers empowered to settle offences subject to the condition that they are not punishable with imprisonment alone or imprisonment and fine.
- Only material violations will trigger penalties or enforcement actions.
- Implementation Compliance
- The new framework defines procedures for imposing penalties and determining their quantum.
- Aimed at stricter compliance within the payments ecosystem.
