(1) The Reserve Bank may, if satisfied, after any inquiry under section 6 or otherwise, that the application is complete in all respects and that it conforms to the provisions of this Act and the regulations issue an authorisation for operating the payment system under this Act having regard to the following considerations, namely:–
(i) the need for the proposed payment system or the services proposed to be undertaken by it;
(ii) the technical standards or the design of the proposed payment system;
(iii) the terms and conditions of operation of the proposed payment system including any security procedure;
(iv) the manner in which transfer of funds may be effected within the payment system;
(v) the procedure for netting of payment instructions effecting the payment obligations under the payment system;
(vi) the financial status, experience of management and integrity of the applicant;
(vii) interests of consumers, including the terms and conditions governing their relationship with payment system providers;
(viii) monetary and credit policies; and
(ix) such other factors as may be considered relevant by the Reserve Bank.
(2) An authorisation issued under sub-section (1) shall be in such form as may be prescribed and shall–
(a) state the date on which it takes effect;
(b) state the conditions subject to which the authorisation shall be in force;
(c) indicate the payment of fees, if any, to be paid for the authorisation to be in force;
(d) if it considers necessary, require the applicant to furnish such security for the proper conduct of the payment system under the provisions of this Act;
(e) continue to be in force till the authorisation is revoked.
(3) Where the Reserve Bank considers that the application for authorisation should be refused, it shall give the applicant a written notice to that effect stating the reasons for the refusal:
Provided that no such application shall be refused unless the applicant is given a reasonable opportunity of being heard.
(4) Every application for authorisation shall be processed by the Reserve Bank as soon as possible and an endeavour shall be made to dispose of such application within six months from the date of filing of such application.
Simplified Explanation
Section 7 of the Payment and Settlement Systems Act, 2007 details the process by which the Reserve Bank of India (RBI) issues or refuses authorization for operating a payment system. This section ensures that the RBI thoroughly assesses an application before granting permission and lays out the criteria for approval or rejection. Here’s a breakdown of its provisions:
Key Provisions of Section 7:
1. Issue of Authorization:
- If the RBI is satisfied, after conducting an inquiry (under Section 6) or otherwise, that the application is complete and meets the requirements of the Act and regulations, it may issue authorization to operate a payment system.
- Before granting authorization, the RBI will consider the following factors:
- Need for the proposed payment system: Whether there is a genuine demand or requirement for the payment system or the services it proposes to offer.
- Technical standards or design: Whether the system’s technical infrastructure and design meet the necessary standards for security, reliability, and efficiency.
- Terms and conditions: The operational terms, including any security procedures that ensure the integrity of the system.
- Funds transfer procedures: How funds will be transferred within the payment system.
- Netting procedure: The system for clearing or settling payment instructions, ensuring that payment obligations are properly netted and settled.
- Financial status and management integrity: The financial health, management experience, and integrity of the applicant, ensuring they are capable of operating a secure and sustainable system.
- Consumer interests: Protection of consumers, including ensuring clear terms and conditions governing the relationship between users and payment service providers.
- Monetary and credit policies: Whether the system aligns with India’s monetary and credit policies, and does not pose risks to the economy.
- Other relevant factors: Any other factors that the RBI considers important for ensuring a safe, efficient, and reliable payment system.
2. Authorization Details:
- The authorization issued by the RBI will be in a prescribed form and include the following details:
- Effective date: The date on which the authorization becomes effective.
- Conditions of operation: The conditions under which the authorization will remain valid.
- Payment of fees: Details of any fees that the applicant must pay for the authorization to remain in force.
- Security requirement: The RBI may require the applicant to furnish security (e.g., a bond or financial guarantee) to ensure the proper conduct of the payment system.
- Validity: The authorization will remain in force until it is revoked by the RBI.
3. Refusal of Authorization:
- If the RBI decides to refuse an application, it must provide the applicant with a written notice, outlining the reasons for the refusal.
- The applicant must also be given a reasonable opportunity to be heard, ensuring that they can present their case before the refusal is finalized.
- This provision ensures fairness and transparency in the decision-making process.
4. Time Frame for Processing Applications:
- The RBI is required to process every application as quickly as possible.
- The RBI must make every effort to dispose of the application within six months from the date of filing. This ensures a timely decision, helping applicants plan their operations and meet market demands.
Summary:
Section 7 outlines the procedure for granting or refusing authorization to operate a payment system:
- Issuance of Authorization: The RBI may issue authorization if it is satisfied that the application meets the required criteria, including the need for the system, its technical design, consumer interests, and alignment with monetary policies.
- Authorization Details: The authorization includes information on the effective date, conditions, fees, and potential security requirements.
- Refusal of Authorization: If the application is refused, the RBI must notify the applicant with reasons, and the applicant must be given a chance to be heard.
- Processing Time: The RBI is expected to process applications within six months of receipt.
This section ensures that the process of obtaining authorization is transparent, timely, and based on comprehensive evaluation, protecting both the interests of consumers and the stability of the financial system.
