REGULATION AND SUPERVISION BY THE RESERVE BANKCentral

Section 11 of The Payment and Settlement Systems Act, 2007

(1)No system provider shall cause any change in the system which would affect the structure or the operation of the payment system without--
1. (a)the prior approval of the Reserve Bank; and
2. (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.

Summary

A payment system provider cannot make major changes to the system's structure or how it works without permission.
They must first get approval from the Reserve Bank before making the change.
The Reserve Bank has two weeks to object to any proposed changes.
If there are objections, the provider has two weeks to respond, and the change can only happen after final approval.

Practical examples

1"MegaPay" wants to change the way it calculates net payments between banks. They send the plan to the Reserve Bank on May 1. The Reserve Bank approves on May 10. MegaPay then notifies all member banks and waits until June 10 before starting the new method.

2"SecureTransfer" proposes a change, but the Reserve Bank sends an objection 10 days later. SecureTransfer has two weeks to explain why the change is safe and must wait for a final "yes" from the Bank.

3During a financial crisis, the Reserve Bank allows "NationalPay" to change its security protocols immediately to prevent hacking, skipping the usual 30-day notice to participants.

FAQ

1. How long does the Reserve Bank have to say "no" to a change?

The Reserve Bank must communicate any objection within two weeks of receiving the proposal.

2. What if the Reserve Bank objects to a change?

The provider has two weeks to send their comments back to the Reserve Bank and must wait for final approval.

Test yourself

Q1.Under Section 11 of The Payment and Settlement Systems Act, 2007, what is the standard notice period a provider must give to participants after getting approval for a change?

Q2.According to Section 11 of The Payment and Settlement Systems Act, 2007, how long does the Reserve Bank have to communicate an objection to a proposed change?

Q3.Under Section 11 of The Payment and Settlement Systems Act, 2007, what can the Reserve Bank do regarding the notice period in the "interest of monetary policy"?

Q4.Under Section 11 of The Payment and Settlement Systems Act, 2007, if the Reserve Bank objects to a change, how long does the system provider have to forward their comments?

10APreviousSection 10A Bank, etc., not to impose charge for using electronic modes of payment.12NextSection 12 Power to call for returns, documents or other information.

←Section 10A Section 12→