(1) No system provider shall cause any change in the system which would affect the structure or the operation of the payment system without–
(a) the prior approval of the Reserve Bank; and
(b) giving notice of not less than thirty days to the system participants after the approval of the Reserve Bank:
Provided that in the interest of monetary policy of the country or in public interest, the Reserve Bank may permit the system provider to make any changes in a payment system without giving notice to the system participants under clause (b) or requiring the system provider to give notice for a period longer than thirty days.
(2) Where the Reserve Bank has any objection, to the proposed change for any reason, it shall communicate such objection to the systems provider within two weeks of receipt of the intimation of the proposed changes from the system provider.
(3) The system provider shall, within a period of two weeks of the receipt of the objections from the Reserve Bank forward his comments to the Reserve Bank and the proposed changes may be effected only after the receipt of approval from the Reserve Bank.
Simplified Explanation
Section 11 of the Payment and Settlement Systems Act, 2007 governs the process by which system providers can implement changes to the payment system that might affect its structure or operation. The section is designed to ensure that any changes to the payment system are transparent, secure, and aligned with national interests, especially concerning monetary policy. Here’s a detailed breakdown of the provisions in this section:
Key Provisions of Section 11:
1. Prior Approval for Changes (Subsection 1):
- System Providers (entities operating payment systems) cannot make any changes that would affect the structure or operation of the payment system unless:
- Prior Approval: They first obtain approval from the Reserve Bank of India (RBI).
- Notice to Participants: After obtaining the RBI’s approval, the system provider must give a notice of at least thirty days to all system participants about the proposed changes.
- Exceptions:
- If the RBI believes that a change is in the interest of the monetary policy or is of significant public interest, the RBI may allow the system provider to implement changes without giving the thirty-day notice or may allow the system provider to give a longer notice period. This provision allows for flexibility when the Reserve Bank deems it necessary for the country’s broader economic or financial interests.
2. Objection by the Reserve Bank (Subsection 2):
- If the RBI has any objections to the proposed changes, it must communicate those objections to the system provider within two weeks of receiving the notice of the proposed changes.
- This ensures that the RBI has a clear window to review any proposed modifications and express concerns if necessary.
3. Response from System Provider (Subsection 3):
- After receiving the RBI’s objections, the system provider must send its comments or clarifications to the RBI within two weeks.
- Only after the RBI’s approval can the system provider proceed with making the proposed changes to the payment system.
Summary:
Section 11 ensures that any changes to the payment system that could affect its structure or operations are carefully regulated and monitored. The key points are:
- A prior approval from the Reserve Bank is required before making any changes to the system.
- The system provider must give a 30-day notice to participants after obtaining approval, though the RBI can waive this requirement if it’s necessary for monetary policy or public interest.
- If the RBI has objections to the changes, it must communicate them within two weeks. The system provider must then respond within two weeks, and no changes can be made until the RBI gives its final approval.
This process helps ensure that any modifications to payment systems are thoroughly vetted and do not pose risks to financial stability, consumer protection, or the integrity of the payment system itself.
