AUTHORISATION OF PAYMENT SYSTEMSCentral

Section 6 of The Payment and Settlement Systems Act, 2007

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.

Summary

Once the Reserve Bank receives an application under Section 5, it can start an inquiry.
The purpose of this inquiry is to check if the details provided by the applicant are true and genuine.
The Bank also checks if the applicant actually has the ability to run the payment system.
It looks into the background and credentials of the people participating in the system.
The Reserve Bank can conduct the inquiry itself or pick another person to do it and provide a written report.

Practical examples

1After Rahul submits his Section 5 application for a new payment gateway, the Reserve Bank sends an officer to his office. The officer checks Rahul's computer servers and financial records to satisfy the "genuineness of the particulars" required by Section 6.

2The Reserve Bank is not sure about a new company's ability to handle millions of transactions. It hires an independent tech expert to investigate the company's software and provide a report as allowed under Section 6.

FAQ

1. When does the Reserve Bank conduct an inquiry?

The inquiry happens after the bank receives an application (under Section 5) but before it decides whether to issue the authorisation.

2. What exactly is the Bank looking for during an inquiry?

It checks if the information provided is genuine, if the applicant is capable of running the system, and the credentials of the participants.

3. Can the Reserve Bank ask someone else to do the investigation?

Yes, it can authorise another person to conduct the inquiry and then require a report from them.

Test yourself

Q1.Under Section 6 of The Payment and Settlement Systems Act, 2007, when is the Reserve Bank permitted to conduct an inquiry?

Q2.According to Section 6 of The Payment and Settlement Systems Act, 2007, which of the following is NOT something the Reserve Bank specifically investigates?

Q3.Under Section 6 of The Payment and Settlement Systems Act, 2007, what can the Reserve Bank require if an inquiry is conducted by an authorised person on its behalf?

Q4.Based on Sections 5 and 6 of The Payment and Settlement Systems Act, 2007, the inquiry is a tool used by the Reserve Bank to:

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