Regulation of Payment Systems in India

December 16, 2019
SEBI Grade A Test Series

The Reserve Bank of India (RBI) under powers from the Payment and Settlement Systems Act, 2007, has endeavoured to ensure that Regulation of Payment Systems is efficient. It seeks to ensure that India has ‘state-of-the-art’ payment and settlement systems that are just safe, secure, efficient, fast and affordable. The Payment system in India consists of Clearing Houses, Speed Clearing, Cheque Truncation System, Real Time Gross Settlement (RTGS), National Electronic Funds Transfer (NEFT), Electronic Clearing Services (ECS), National Electronic Clearing Service (NECS)

Regulation of Payment Systems

Payment Systems Vision 2018

The Payment Systems Vision 2018 of the Reserve Bank envisaged building of ‘best-in-class’ payment and settlement systems for a ‘less-cash’ India through the four strategic pillars of responsive regulation, robust infrastructure, effective supervision and customer centricity. The Vision 2018 has facilitated:

  1. Continued decrease in the share of paper-based clearing instruments
  2. Consistent growth in individual segments of retail electronic payment systems such as the National Electronic Funds Transfer (NEFT), Immediate Payment Service (IMPS) and card transactions; (c) increase in registered customer base for mobile banking
  3. Launch of new products like Unified Payments Interface (UPI) and Bharat QR (BQR)
  4. Significant growth in acceptance infrastructure
  5. Accelerated use of Aadhaar in payment systems

These endeavours have achieved:

  • Digital payment transaction turnover vis-à-vis GDP (at market prices-current price) increased from 7.14 in 2016 to 7.85 in 2017 and further to 8.42 in 2018
  • The turnover in payment transactions (after including CCIL figures and paper) vis-à-vis GDP (at market prices-current price) increased from 14.41 in FY 2015-16 to and 14.73 in FY 2016-17 and further to 15 in 2017-18.
  • Debit card usage at Point of Sale (PoS) vis-à-vis ATM is 30.1% of total in terms of volume (10.4% in 2014-15).

Payment Systems Vision – 2021

The Payment and Settlement Systems in India: Vision – 2019-2021 was released on May 15, 2019. The core theme was– EMPOWERING EXCEPTIONAL (E)PAYMENT EXPERIENCE. The  Vision aims towards:

  • Enhancing the experience of Customers;
  • Empowering payment System Operators and Service Providers;
  • Enabling the Eco-system and Infrastructure;
  • Putting in place a Forward-looking Regulation;
  • Supported by a Risk-focussed Supervision.

The Vision envisages four goal-posts (4 Cs) – Competition, Cost, Convenience and Confidence. For enhancement of Competition in the payment systems landscape, specific thrust areas like creating regulatory sandbox, authorising new players, etc., have been incorporated; this along with the presence of multiple players in the market is expected to achieve optimal Cost for the customers; freer access with availability of multiple payment system options anytime-anywhere should cater to the requirement of Convenience; the ‘no-compromise’ approach towards safety of payment systems should address security vulnerabilities to retain customer Confidence.

It has four goal-posts of Vision 2021 with 36 specific action points.

Read Next: Regulation of Money Market Instruments

Download this article as PDF

Click to go to JAIIB Preparation Page

Tag: payment and settlement systems act, payment and settlement system in india, payment systems in india pdf, Regulation of Payment Systems, Regulation of Payment Systems in India, Regulation of Payment Systems pdf