Payments Regulatory Board (PRB)

What Happened?

1. Recently, the Reserve Bank of India (RBI) has announced the creation of a new body called the Payments Regulatory Board (PRB).
2. This Board will look after the regulation and supervision of payment systems in India.
3. It will replace the existing Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) which was formed under the Payment and Settlement Systems (PSS) Act, 2007.

What is the PRB?

1. The Payments Regulatory Board is a new six-member board, headed by the Governor of the RBI.
2. It will oversee the working of digital and electronic payments in the country.
3. This includes everything from mobile wallets to UPI payments.
4. Composition of PRB:
   1. RBI Governor (Chairperson)
   2. Deputy Governor in charge of Payment and Settlement Systems
   3. One RBI officer, nominated by the Central Board
   4. Three members nominated by the Central Government
5. The RBI officials will be ex officio members, which means they will be members because of the posts they hold.

Who can Join the Meetings?

1. Apart from its main members, the PRB can also invite experts in payment systems, IT, and law to join the meetings.
2. These invitees can be permanent or called only when needed.
3. The Principal Legal Adviser of the RBI will always be a permanent invitee.
4. The PRB is required to meet at least twice a year.
5. Voting in the Board:
   1. Each member of the PRB will have one vote.
   2. Decisions will be made by a majority of votes.
   3. If there is a tie, the RBI Governor, or in his absence, the Deputy Governor, will have a second or casting vote to break the tie.

Why was This Needed?

1. In the past, there was a proposal to create an independent regulator for payment systems, separate from the RBI.
2. An inter-ministerial committee had suggested this change.
3. The RBI strongly opposed the idea, saying that payment regulation must stay with the RBI.
4. The RBI argued that it has the experience and systems to ensure secure, smooth, and well-regulated payment operations.
5. In 2018, the RBI issued a ‘Dissent Note’ explaining that the PRB should remain under the RBI’s control and be headed by the Governor.

Difference Between BPSS & PRB:

Aspect	BPSS (Existing Body)	PRB (New Body - 2025)
Status	Existing regulatory board under the RBI	Newly constituted regulatory board replacing BPSS
Governing Authority	Reserve Bank of India (RBI)	Reserve Bank of India (RBI)
Chairperson	RBI Governor	RBI Governor (ex-officio)
Composition	5 membered body (All from RBI)	6 membered body (3 RBI nominees and 3 Central Government nominees)
Government Representation	No government nominees	3 Central Government nominees
Voting Rights	Not specifically detailed in public documents	Each member gets one vote Majority-based decisions Casting vote with Governor (or Deputy Governor in absence)
Meetings	As decided by RBI	At least twice a year (mandatory)
Expert Participation	Not specified	Experts (from payments, IT, law) can be permanent/ad hoc invitees RBI’s Principal Legal Adviser is a permanent invitee

What is the Significance of the PRB?

1. Strengthens Regulatory Oversight: The PRB provides a dedicated body focused on supervising payment systems, which helps ensure stronger monitoring, greater accountability, and consistent policy implementation.
2. Keeps RBI in Control: By placing the PRB under the leadership of the RBI Governor, the government ensures that regulation stays with an experienced institution.
   1. This avoids confusion and fragmentation in oversight, which could arise from having a separate regulator.
3. Balances Government and Central Bank Interests: Three members nominated by the central government and three from the RBI (including the Governor).
   1. So in this way PRB brings both policy and operational expertise in itself. This balance can lead to more informed and inclusive decisions.
4. Supports Innovation in Payments: The PRB can invite experts from fields like technology and law to guide it.
   1. This will help the board stay updated on emerging trends and technologies, such as tokenization and device-based payments.
5. Safeguards Consumer Interests: Under RBI’s leadership, the PRB can enforce strong safeguards like KYC norms, grievance redressal mechanisms, and cybersecurity standards to protect users, especially as more people move to digital transactions.
6. Aligns with Global Practices: Many countries have dedicated regulatory bodies for digital payments. The PRB brings India in line with international best practices by creating a specialized authority focused on this sector.

Conclusion

The new Payments Regulatory Board is a step forward in managing India’s rapidly growing digital payments ecosystem. By keeping the regulation under the RBI, the system aims to remain strong and secure, while also allowing room for innovation and growth.

 

Payment and Settlement Systems (PSS) Act, 2007 About The Payment and Settlement Systems Act, 2007 came into effect on 12th August 2008.     The Act aims to regulate and supervise payment systems in India. It gives the Reserve Bank of India (RBI) the power to manage these systems and related matters. The RBI is allowed to form a special committee called the Board for Regulation and Supervision of Payment and Settlement Systems (BPSS). The Act also gives legal support to concepts like netting and settlement finality, which are important for safe and smooth payments. What are the Regulations Made Under the Act? Two regulations were made under this Act: BPSS Regulations, 2008 Payment and Settlement Systems Regulations, 2008 Both came into force on 12th August 2008, the same day as the Act. What do These Two Regulations Focus On? BPSS Regulations, 2008 explain how the BPSS Committee should be formed and how it should work. It talks about its members, duties, meetings, and the power to form other smaller groups for advice. Payment and Settlement Systems Regulations, 2008 focus on: How to apply for permission to run a payment system? How payment instructions should be handled? What rules should be followed? What information system providers must submit to the RBI. What is a “Payment Obligation”? A payment obligation means the money that one person or company in a payment system has to pay to another. What is a “Payment Instruction”? A payment instruction is an order or request made by a person or a system participant to make a payment. It can be in writing (like a cheque or payment order) or sent electronically. What is a “Settlement”? Settlement is the process of completing payment instructions. It includes payments involving money, securities, foreign exchange, or derivatives. What is a “Payment System” under the Act? A payment system is any system that allows payments to happen between a payer and a beneficiary. It includes the services of clearing, payment, and settlement. It does not include stock exchanges or their clearing corporations. Examples of payment systems include those used for credit cards, debit cards, smart cards, and money transfers.