(1) The Reserve Bank may, by notification, make regulations consistent with this Act to carry out the provisions of this Act.
(2) In particular, and without prejudice to the generality of the foregoing provision, such regulations may provide for all or any of the following matters, namely:–
(a) the powers and functions of the 1[Board referred to in sub-section (2)], the time and venue of its meetings and the procedure to be followed by it at its meetings (including the quorum at such meetings) under sub-section (4) of section 3;
(b) the form and manner in which an application for authorisation for commencing or carrying on a payment system shall be made and the fees which shall accompany such application under subsection (2) of section 5;
(c) the form in which an authorisation to operate a payment system under this Act shall be issued under sub-section (2) of section 7;
(d) the format of payment instructions and other matters relating to determination of standards to be complied with by the payment systems under sub-section (1) of section 10;
(e) the intervals, at which and the form and manner in which the information or returns required by the Reserve Bank shall be furnished under section 12;
(f) such other matters as are required to be, or may be, prescribed.
(2) Any regulation made under this section shall have effect from such earlier or later date (nor earlier than the date of commencement of this Act) as may be specified in the regulation.
(3) Every regulation shall, as soon as may be after it is made by the Reserve Bank, be forwarded to the Central Government and that Central Government shall cause a copy of the same to be laid before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the regulation, or both Houses agree that the regulation should not be made, the regulation shall, thereafter, have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that regulation.
1. Subs. by the Finance Act 2017, s. 153, for “Committee constituted under sub-section (2)”
Simplified Explanation
This section grants the Reserve Bank of India (RBI) the authority to make regulations that are consistent with the provisions of the Payment and Settlement Systems Act, 2007, to ensure its effective implementation.
Key Provisions:
- Regulation Making Power:
- The Reserve Bank is empowered to make regulations through a notification to carry out the provisions of this Act. These regulations are aimed at ensuring that the objectives of the Act are met and may cover specific operational details not directly addressed by the Act itself.
- Specific Areas for Regulations: The regulations may provide for the following matters, including but not limited to:
- Powers and functions of the Board: The Reserve Bank may define the time, venue, and procedures for meetings of the Board established under Section 3(4), including the quorum.
- Application for Authorization: The regulation may specify how applications for authorization to start or operate a payment system should be made, as well as the fees required under Section 5(2).
- Authorization Process: It can define the form in which an authorization to operate a payment system is issued, as detailed in Section 7(2).
- Payment Instructions and Standards: The regulations may set out the format of payment instructions and other technical details relating to the standards that must be complied with by payment systems under Section 10(1).
- Information and Returns: Regulations can specify the intervals, form, and manner in which information or returns are to be provided to the Reserve Bank, as stipulated in Section 12.
- Other Matters: The RBI has the authority to make regulations for other matters as required or allowed by the Act.
- Effectiveness of Regulations:
- Any regulation made by the Reserve Bank will have effect from the date specified in the regulation. This date can be earlier or later than the regulation’s issuance, but it cannot be earlier than the commencement of the Act.
- Parliamentary Scrutiny:
- After a regulation is made, the Reserve Bank must forward it to the Central Government, which will then lay it before both Houses of Parliament while they are in session. The regulation will be laid for a period of 30 days, which may be spread across one or more sessions.
- If, before the expiry of the next session, both Houses of Parliament agree to modify or annul the regulation, it will only have effect in the modified form or not at all. However, any actions taken under the regulation prior to the modification or annulment will still be valid.
Practical Implications:
- Flexibility: The Reserve Bank has the flexibility to regulate many operational aspects of the payment systems that are crucial for their proper functioning but are not explicitly covered by the Act. This allows for the adaptation of regulations to evolving market needs and technological advancements.
- Parliamentary Oversight: Regulations are subject to Parliamentary review, ensuring that the Reserve Bank’s regulatory powers are kept in check and are not exercised arbitrarily. The provision for modifications or annulments ensures that Parliament has a role in overseeing the regulatory framework.
- Timely Updates: The RBI can amend regulations as needed, and the effective date of such regulations can be set to ensure proper implementation, keeping them in line with market or technological developments.
Conclusion:
Section 38 provides the Reserve Bank of India with significant powers to make detailed regulations necessary to implement the Payment and Settlement Systems Act. The RBI‘s ability to issue, modify, and enforce regulations, subject to Parliamentary review, ensures the Act’s flexibility while maintaining transparency and accountability. This regulatory framework ensures that payment systems are properly governed, allowing for operational clarity and necessary updates over time.
