REGULATION AND SUPERVISION BY THE RESERVE BANKCentral

Section 10 of The Payment and Settlement Systems Act, 2007

(1)The Reserve Bank may, from time to time, prescribe--
1. (a)the format of payment instructions and the size and shape of such instructions;
2. (b)the timings to be maintained by payment systems;
3. (c)the manner of transfer of funds within the payment system, either through paper, electronic means or in any other manner, between banks or between banks and other system participants;
4. (d)such other standards to be complied with the payment systems generally;
5. (e)the criteria for membership of payment systems including continuation, termination and rejection of membership;
6. (f)the conditions subject to which the system participants shall participate in such fund transfers and the rights and obligations of the system participants in such funds.
(2)Without prejudice to the provisions of sub-section (1), the Reserve Bank may, from time to time, issue such guidelines, as it may consider necessary for the proper and efficient management of the payment systems generally or with reference to any particular payment system.

Summary

The Reserve Bank has the power to set rules and standards for all payment systems.
These standards include the physical size, shape, and format of payment instructions.
The Reserve Bank can decide the timings that payment systems must follow and how funds are transferred.
It sets the rules for who can join a payment system and why a membership might be ended or rejected.
The Reserve Bank can also issue general guidelines to ensure systems are managed efficiently.

Practical examples

1The Reserve Bank issues a new rule stating that all digital payment receipts must follow a specific electronic format and include a 10-digit transaction ID.

2To ensure the banking system is not overwhelmed, the Reserve Bank sets a standard timing that all inter-bank transfers must be completed between 9:00 AM and 6:00 PM.

3The Reserve Bank creates a guideline that says any payment company wanting to join the national grid must have at least five years of experience in finance.

FAQ

1. Can the Reserve Bank tell a private payment company what time to operate?

Yes, the Reserve Bank can prescribe the timings to be maintained by payment systems.

2. Does the Reserve Bank control how paper checks look?

Yes, they have the power to prescribe the format, size, and shape of payment instructions, which includes paper and electronic forms.

3. Who decides who can be a member of a payment system?

The Reserve Bank sets the criteria for membership, including how someone can join, stay, or be removed.

Test yourself

Q1.Under Section 10 of The Payment and Settlement Systems Act, 2007, the Reserve Bank can prescribe standards for which of the following?

Q2.According to Section 10 of The Payment and Settlement Systems Act, 2007, who determines the criteria for the termination of membership in a payment system?

Q3.Under Section 10 of The Payment and Settlement Systems Act, 2007, in what manner can the Reserve Bank prescribe that funds be transferred?

Q4.Under Section 10 of The Payment and Settlement Systems Act, 2007, what extra power does the Reserve Bank have besides setting specific standards?

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