Finance Minister Arun Jaitley addressed the concern raised by the banking regulator in setting up a payments regulatory board which will not be independent of Reserve Bank of India, according to a proposal in the Budget.
The payment regulatory board will be set up within the RBI which will comprise of six members, of which three will be from RBI, according to the Finance Bill which was tabled in the Parliament on February 1. The chairman of the board will be the Governor of RBI. The central bank’s Deputy Governor in-charge of payments and settlements will also be a member. RBI will also nominate a third member.
The three external members will be nominated by the Centre.
MPC board
The Monetary Policy Committee (MPC) is also a six-member board with three members from RBI and the Governor as the chairman.
The government had set up a Committee on Digital Payments — headed by finance secretary Ratan Watal, which recommended the board to be an independent body. RBI was represented by former deputy governor H.R. Khan and Executive Director Chandan Sinha in the committee.
“The Committee on Digital Payments has recommended structural reforms in the payment eco system, including amendments to the Payment and Settlement Systems Act, 2007…It is proposed to create a Payments Regulatory Board in the RBI by replacing the existing Board for Regulation and Supervision of Payment and Settlement Systems,” Mr. Jaitley said during his budget speech.
He said that the Centre will undertake a comprehensive review of the Payment and Settlement Systems Act, 2007, and bring about appropriate amendments.
Watal committee
One of the Watal committee’s terms of reference was to study and recommend changes in the regulatory mechanism under various acts such as the Payments and Settlement Act, the RBI Act, and the Information Technology Act among others.
“The Finance Minister said the recommendations will be reviewed and implemented. The move to set up a board will create a dedicated focus on digital payment as a subject, which is a vast area,” said Naveen Surya, managing director of payments solutions firm ItzCash and President, Payments Council of India. He was was also a member of the Watal committee.
The Watal committee was given the mandate for laying down a medium-term roadmap for digital payments to grow substantially over the next three years from the current level of about 5%t of personal consumption and 20% of all transactions.
Following the withdrawal of the high value currency notes, the Centre has been pushing digital transaction instead of cash. As a result, electronic transaction volumes have gone up significantly since November. One of the key areas of this year budget was also to push digital transaction.
“FreeCharge welcomes the policy measures aimed at accelerating the adoption of a digital economy in India,” said mobile wallet player FreeCharge chief executive officer, Govind Rajan. “The incentives for adoption of fintech equipment, expansion of digital infrastructure in under-served areas, Aadhar Pay for wider adoption by merchants and capping cash transactions at Rs 3 Lakhs, all together have kept the spotlight on building a less-cash India.”
