(1) If a system provider,–
(i) contravenes any provisions of this Act, or
(ii) does not comply with the regulations, or
(iii) fails to comply with the orders or directions issued by the designated authority, or
(iv) operates the payment system contrary to the conditions subject to which the authorisation was issued,
the Reserve Bank may, by order, revoke the authorisation given to such system provider under this Act:
Provided that no order of revocation under sub-section (1) shall be made–
(i) except after giving the system provider a reasonable opportunity of being heard; and
(ii) without prejudice to the direction of the Reserve Bank to the system provider that the operation of the payment system shall not be carried out till the order of revocation is issued.
(2) Nothing contained in sub-section (1) shall apply to a case where the Reserve Bank considers it necessary to revoke the authorisation given to a payment system in the interest of the monetary policy of the country or for any other reasons to be specified by it in the order.
(3) The order of revocation issued under sub-section (1) shall include necessary provisions to protect and safeguard the interests of persons affected by such order of revocation.
(4) Where a system provider becomes insolvent or dissolved or wound up, such system provider shall inform that fact to the Reserve Bank and thereupon the Reserve Bank shall take such steps as deemed necessary to revoke the authorisation issued to such system provider to operate the payment system.
Simplified Explanation
Section 8 of the Payment and Settlement Systems Act, 2007 addresses the revocation of authorization granted to a system provider (the entity operating a payment system) in cases of non-compliance or other specified reasons. This section sets out the conditions under which the Reserve Bank of India (RBI) can revoke authorization and the procedural safeguards to ensure fairness. Here’s a detailed breakdown:
Key Provisions of Section 8:
1. Grounds for Revocation (Subsection 1):
The RBI may revoke the authorization of a system provider if any of the following conditions are met:
- Contravention of the Act: If the system provider violates any provisions of the Payment and Settlement Systems Act.
- Non-compliance with Regulations: If the system provider fails to comply with the regulations issued under this Act.
- Failure to comply with RBI Orders: If the system provider disregards orders or directions issued by the RBI (the designated authority).
- Violation of Conditions of Authorization: If the system provider operates the payment system in a manner that violates the conditions under which the authorization was granted.
2. Safeguards Before Revocation:
The section includes procedural safeguards before revocation can occur:
- Opportunity to be Heard: The system provider must be given a reasonable opportunity to present its case before the authorization is revoked.
- Interim Directions: Before issuing the order of revocation, the RBI may issue directions to the system provider to cease operating the payment system until the revocation is finalized. This helps to prevent further potential harm or disruption.
3. Revocation in the Interest of Monetary Policy (Subsection 2):
- If the RBI considers it necessary to revoke the authorization due to the monetary policy of the country or for any other reasons deemed relevant, it can do so without following the regular procedure of giving the system provider an opportunity to be heard.
- This clause allows the RBI to take swift action in cases where revocation is deemed urgent for the broader financial or economic stability of the country.
4. Provisions to Safeguard Affected Parties (Subsection 3):
- The revocation order issued by the RBI must include provisions to protect the interests of any parties who might be negatively affected by the revocation (e.g., consumers, employees, or other stakeholders).
- These provisions could include measures to ensure that outstanding payments are settled or that customers’ funds are safeguarded.
5. Insolvency, Dissolution, or Winding-Up (Subsection 4):
- If a system provider becomes insolvent, is dissolved, or is wound up, it must inform the RBI.
- Upon receiving such information, the RBI will take the necessary steps to revoke the authorization of the system provider to operate the payment system.
- This ensures that the operation of a payment system is not continued by an entity that is no longer financially viable or legally capable of operating.
Summary:
Section 8 provides the framework for revoking authorization granted to a payment system operator. The key points are:
- The RBI can revoke authorization if the system provider violates the Act, fails to comply with regulations or RBI orders, or breaches the conditions of its authorization.
- Before revocation, the system provider must be given a chance to explain itself, though the RBI can take interim measures to stop operations until the issue is resolved.
- Revocation can also happen in the interest of monetary policy or other reasons deemed necessary by the RBI, without the usual procedural safeguards.
- The RBI must include safeguards to protect the interests of those affected by the revocation.
- In cases of insolvency or dissolution, the system provider must notify the RBI, which will then revoke the authorization.
This section ensures that the RBI has the authority to maintain the stability and integrity of the payment system by removing operators who fail to meet legal and regulatory standards or who no longer have the financial ability to operate.
