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Business EconomyPosted at: Oct 20 2018 6:27PM


RBI raises dissent on proposed payments board control

Mumbai, Oct 20 (UNI) The Reserve Bank of India (RBI) has voiced its
reservations on the report of an inter-ministerial committee which
recommended that the proposed Payments Regulatory Board (PRB) should
be an independent regulator.
The RBI wants the body to be under its purview instead, as had been
recommended in the Finance Bill of 2018.
''The Payments Regulatory Board (PRB) must remain with the Reserve
Bank and headed by the Governor of central bank,'' RBI said on
Friday.
''It may comprise three members nominated by the government and RBI,
respectively, with a casting vote for the Governor to ensure smooth
operations of the board. The composition of the PRB is also not in
conformity with the announcements made in the Finance Bill by the
Finance Minister,'' it said.
The panel suggested that the PRB’s chairperson should be appointed
by the government in consultation with the RBI.
The central bank rejected this and said the board regulating
payments should remain under the chairmanship of the central bank
Governor to effectively manage payment systems.
The Finance Bill had said the RBI Governor would be in charge of the
board.
In a dissenting note to the Inter-Ministerial Committee for
finalisation of amendments, the RBI said, ''There is no case of
having a regulator for payment systems outside the RBI.''
The Watal Committee had recommended the establishment of the PRB
within the overall structure of the RBI, it said.
''Since banks are regulated by the RBI, a holistic regulation by RBI
will be more effective and not result in increased compliance
costs,'' the Bank said.
''There needs to be integrated operations and not co-ordination.
Co-ordination is required across different but related functions,
which is not the case for payment systems. This is also the basis
for reiterating that the Governor of RBI should be the chairman of
the proposed PRB,’’ the note said.
Objectives for the PRB, the RBI said, were best avoided to be
mandated by law. For, it felt that law might not provide the much-
needed flexibility.
''The views of the Ministry of Law could also be taken into account
on jurisdictional conflict. Further, innovation is generally not
mandated -- it evolves based on requirements,'' it added.
Since banks are regulated by the RBI, a holistic regulation by RBI
would be more effective and not result in increased compliance costs
if multiple regulators exist for related systems. Almost all
countries in the world have recognised this change, which has gained
significance in the recent past.
While welcoming changes, the RBI said, ''Changes should not result
in existing foundations being shaken and the potential creation of
disturbances in an otherwise well-functioning structure as far as
India is concerned.''
RBI also questioned the need for fresh legislation when it would be
easier to amend the existing Act, as suggested by the report.
The report had suggested that this was key to promoting competition,
innovation and customer protection.
UNI JS SS NP1824
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