Focus: GS-III Indian Economy
Why in news?
The Reserve Bank of India (RBI) released a framework for setting up of a pan-India umbrella entity for retail payments systems.
Details: The Entity for Retail Payments
- The pan-India umbrella entity for retail payments systems is to be incorporated under the Companies Act, 2013, would need to focus on retail payments systems, the RBI said.
- The umbrella entity will set up, manage and operate new payments systems in the retail space comprising ATMs, white label PoS, Aadhaar-based payments and remittance services.
- The entity will operate clearing and settlement systems for participating banks and non-banks, identify and manage relevant risks, monitor retail payments system developments and related issues in the country and internationally.
- The RBI said it will be the responsibility of the entity to frame necessary rules and the related processes to ensure that the system is safe and sound, and that payments are exchanged efficiently.
- The entity will be permitted to participate in Reserve Bank’s payment and settlement systems, including having a current account with Reserve Bank, if required.
- The formation of the umbrella entity has been authorised under the Payment and Settlement Systems Act, 2007.
Payment and Settlement Systems Act, 2007
- The Payment and Settlement Systems Act 2007, set up by the RBI, provides for the regulation and supervision of payment systems in India and designates the apex institution (RBI) as the authority for that purpose and all related matters.
- To exercise its powers and perform its functions and discharge its duties, the RBI is authorized under the Act to constitute a committee of its central board, which is known as the Board for Regulation and Supervision of Payment and Settlement Systems (BPSS).
- The Act also provides the legal basis for ‘netting’ and ‘settlement finality’.
- The Act defines that a payment system enables payment to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them, but does not include a stock exchange.
- It is further stated a ‘payment system’ includes the systems enabling credit card operations, debit card operations, smart card operations, money transfer operations or similar operations.
Except stock exchanges and clearing corporations set up under stock exchanges, all other systems carrying out either clearing or settlement or payment operations or all of them are regarded as payment systems.
-Source: The Hindu