After the receipt of an application under section 5, and before an authorisation is issued under this Act, the Reserve Bank may make such inquiries as it may consider necessary for the purpose of satisfying itself about the genuineness of the particulars furnished by the applicant, his capacity to operate the payment system, the credentials of the participants or for any other reason and when such an inquiry is conducted by any person authorised by it in this behalf, it may require a report from such person in respect of the inquiry.
Simplified Explanation
Section 6 of the Payment and Settlement Systems Act, 2007 outlines the process of inquiry by the Reserve Bank of India (RBI) after it receives an application for authorization to operate a payment system. This section allows the RBI to verify the information provided by the applicant before granting authorization. Here’s a detailed breakdown:
Key Provisions of Section 6:
1. Inquiries by the RBI:
- After receiving an application for authorization under Section 5, the Reserve Bank is not required to automatically grant the authorization.
- The RBI has the discretion to make any inquiries it deems necessary to assess the application.
- The inquiry can be conducted to verify various aspects, such as:
- The genuineness of the information provided by the applicant.
- The applicant’s capacity to operate the proposed payment system.
- The credentials and reliability of the participants in the payment system.
- Any other matter that the RBI considers relevant for ensuring the applicant’s ability to operate the system safely and efficiently.
2. Authorized Person to Conduct Inquiry:
- The RBI can authorize a person (such as an officer or an external expert) to carry out the inquiry on its behalf.
- The authorized person must provide a report to the RBI regarding the findings of the inquiry.
- This step ensures that the RBI has all the necessary information to make an informed decision on whether to grant authorization.
Purpose of the Inquiry:
The inquiry process ensures that:
- The information submitted by the applicant is accurate and trustworthy.
- The applicant has the financial capability, technical expertise, and operational infrastructure to run the payment system securely and effectively.
- The participants in the payment system (such as banks, financial institutions, and other entities) are properly credentialed and meet regulatory standards.
- The RBI can identify and address any potential risks associated with the applicant or the proposed system before it is authorized to operate.
Summary:
Section 6 grants the Reserve Bank of India the authority to:
- Conduct inquiries after receiving an application for authorization under Section 5.
- Verify the authenticity of the application and the capacity of the applicant to operate a payment system.
- Appoint an authorized person to carry out the inquiry and submit a report to the RBI.
This section is essential for ensuring that only qualified, trustworthy, and capable entities are allowed to operate payment systems, thereby safeguarding the integrity and stability of India’s financial infrastructure.
