||Details in the report
|Executive Summary – para 8
||The PRB to be an independent regulator.
||There is no case of having a regulator for payment systems outside the RBI.
||On the composition of the PRB.
||The composition of the PRB is not in conformity with the announcements made in the Finance Bill by the Finance Minister.
||On Competition, innovation and customer protection to be the main objectives under the proposed draft bill
||Competition, innovation and customer protection have been hall marks of the initiatives under the PSS Act. Today, most of the developments have been thanks to innovation; the existence of multiple players and a myriad of systems is proof of competition and a host of customer protection measures have been the outcome of the initiatives taken under the PSS Act. If there are specific concerns which need to be provided for, then making amendments to a relatively new law (i.e. the PSS Act of 2007) is much more easier than framing a new Act.
||On the PRB to be an independent regulator
||The Watal Committee has recommended the establishment of the PRB within the overall structure of the RBI which would deliver the outcomes which is now changed; there is no need for any deviation and the PRB can be with the RBI.
||An area of concern, arising out of systemically important payment systems.
||Since banks are regulated by the RBI, a holistic regulation by RBI would be more effective and not result in increased compliance costs if multiple regulators exist for related systems. Almost all countries in the world have recognized this change which has gained significance in the recent past.
||On the need to have non banks to have access and participate in payment systems
||Currently, non-banks do have access to payment systems operated by banks; in fact there are payment systems operated by non-banks (for e.g. NPCI and card companies as well as PPI issuers) as well; this has been referred to in para 2.8 of the report also.
||It is important to distinguish the role of the Central Bank as an infrastructure institution providing settlement function from its role as a regulator of the payment sector. It is this role of the regulator which needs to evolve from being largely bank centric.
||Payment systems are actually technology based substitutes for currency. The distribution of currency is done by the RBI through the banks; the logical extension of this to payment systems has being yielding good results. Fin tech companies and other non-banks have been bridging this function very well. It is not clear how non-banks can be ascribed the job of creating money via payment systems. It needs to be recalled that even banks distribute currency on behalf of the RBI and cannot create their own currency.
|Para 2.13 to 2.17
||Committee’s analysis of the suggestions of the RBI
||The essence of my arguments have not been factored in the recommendations.
||Formal mechanism for co-ordination between PRB and RBI
||My view is that 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. This is also the basis for reiterating that the Governor of the RBI should be the Chairman of the proposed PRB.
||On the explicit indication of Risk Based regulatory framework.
||Approaches to regulation are best allowed to be evolved by the regulator so that changing environments can be effectively addressed.
|Para 3.5 and 3.6
||On the proposed detailed structure of the PRB
||For the reasons stated in the note, I do not subscribe to the views. It may be also mentioned that world over, payment systems – especially retail ones do not generate self-sufficiency. If this has to be achieved in India, then these systems may become unaffordable, thereby not supporting the common man, which goes against the spirit of the objectives sought for.
||Objectives outlined for the PRB in the draft Bill
||Objectives for the PRB are best avoided to be mandated by law, which may not provide the much needed flexibility. The views of the Ministry of Law could also be taken into account on jurisdictional conflict. Further, innovation is generally not mandated – it evolves based on requirements.
||On designating the SAT for grievance redress
||It is not clear why the SAT is being brought in for resolving payment system related cases and more so when exchanges and securities markets are not under the purview of the Payment Systems Bill.
||It may be mentioned that RBI does welcome changes and is not totally against a new PSS Bill if indeed required. It has to be, however, recognized that changes should not result in existing foundations being shaken and the potential creation of disturbances in an otherwise well-functioning and internationally acclaimed structure as far as India is concerned.