1[3. Designated authority.–(1) The Reserve Bank shall be the designated authority for the regulation and supervision of payment systems under this Act.
(2) The Reserve Bank shall exercise the powers, perform the functions and discharge the duties conferred on it under this Act through a Board to be known as the “Payments Regulatory Board”.
(3) The Board shall consist of the following members, namely:–
(a) the Governor of the Reserve Bank-Chairperson, ex officio;
(b) the Deputy Governor of the Reserve Bank in-charge of the Payment and Settlement Systems-Member, ex officio;
(c) one officer of the Reserve Bank to be nominated by the Central Board of the Reserve Bank-Member, ex officio; and
(d) three persons to be nominated by the Central Government-Members.
(4) The powers and functions of the Board referred to in sub-section (2), the time and venue of its meetings, the procedures to be followed in such meetings (including the quorum at such meetings) and other matters incidental thereto shall be such as may be prescribed.]
1. Subs. by Finance Act 2017, s. 152, for the following :–
“CHAPTER II
DESIGNATED AUTHORITY AND ITS COMMITTEE
3. Designated authority and its Committee.–(1) The Reserve Bank shall be the designated authority for the regulation and supervision of payment systems under this Act.
(2) The Reserve Bank may, for the purposes of exercising the powers and performing the functions and discharging the duties conferred on it by or under this Act, by regulation, constitute a committee of its Central Board to be known as the Board for Regulation and Supervision of Payment and Settlement Systems.
(3) The Board constituted under sub-section (2) shall consist of the following members, namely:–
(a) Governor, Reserve Bank, who shall be the Chairperson of the Board;
(b) Deputy Governors, Reserve Bank, out of whom the Deputy Governor who is in-charge of the Payment and Settlement Systems, shall be the Vice-Chairperson of the Board;
(c) Not exceeding three Directors from the Central Board of the Reserve Bank of India to be nominated by the Governor, Reserve Bank.
(4) The powers and functions of the Board constituted under sub-section (2), the time and venue of its meetings, the procedure to be followed in such meetings, (including the quorum at such meetings) and other matters incidental thereto shall be such as may be prescribed.
(5) The Board for Regulation and Supervision of Payment and Settlement Systems constituted under clause (i) of subsection (2) of section 58 of the Reserve Bank of India Act, 1934 (2 of 1934) shall be deemed to be the Board constituted under this section and continue accordingly until the Board is reconstituted in accordance with the provisions of this Act and shall be governed by the rules and regulations made under the Reserve Bank of India Act, 1934 in so far as they are not inconsistent with the provisions of this Act.”
Simplified Explanation
Section 3 of the Payment and Settlement Systems Act, 2007 designates the Reserve Bank of India (RBI) as the primary authority responsible for regulating and supervising payment systems in India. The section also outlines the formation, powers, and functions of the Payments Regulatory Board, which is established within the RBI to exercise the powers and perform the duties conferred by the Act. Here’s a detailed breakdown:
1. Designated Authority:
- Reserve Bank of India (RBI) is the designated authority for regulating and supervising payment systems under this Act. The RBI is responsible for overseeing the operation and integrity of payment systems within India.
2. Formation of Payments Regulatory Board:
- The Payments Regulatory Board is set up within the Reserve Bank to carry out the functions and exercise the powers granted by the Act.
- The Board is responsible for the regulation, supervision, and development of payment systems in India.
3. Composition of the Payments Regulatory Board:
- The Board consists of the following members:
- Governor of the RBI – Chairperson (ex officio).
- Deputy Governor of the RBI in charge of Payment and Settlement Systems – Member (ex officio).
- One officer of the RBI, nominated by the Central Board of the RBI – Member (ex officio).
- Three persons nominated by the Central Government – Members.
- The Central Government has the discretion to appoint three additional members who can bring expertise or experience relevant to the payment systems field.
4. Powers and Functions of the Board:
- The Board has the authority to regulate and supervise payment systems under the Act, including the powers to set rules, regulations, and guidelines.
- The time, venue, and procedures for the meetings of the Board, including the quorum (minimum number of members required to be present for the meeting to be valid), and other procedural matters, will be prescribed in detail through regulations.
5. Subsequent Amendments (Finance Act 2017):
- Finance Act, 2017 replaced the earlier provision of the Board with the current structure. The new provision states that the Board shall consist of:
- Governor of the RBI as Chairperson.
- Deputy Governors of the RBI, including the one in charge of Payment and Settlement Systems as Vice-Chairperson.
- Directors from the Central Board of RBI, nominated by the Governor, up to a total of three members.
- The Board for Regulation and Supervision of Payment and Settlement Systems (earlier formed under the Reserve Bank of India Act, 1934) is deemed to be the same Board under this section until it is reconstituted according to the new provisions of the Payment and Settlement Systems Act.
6. Powers of the Board:
- The Board’s responsibilities include the power to make regulations for implementing its functions and supervising the payment systems, and to manage the operational aspects of the payment systems.
Summary:
- Section 3 establishes the Reserve Bank of India (RBI) as the central authority for regulating payment systems in India.
- The section outlines the formation of the Payments Regulatory Board, which plays a critical role in overseeing payment systems, ensuring their smooth functioning, and safeguarding financial stability.
- The Board’s composition, powers, and operational procedures are designed to provide a structured approach for the regulation and development of payment systems in India.
