The Reserve Bank of India (“RBI”) has issued a revised framework for imposing monetary penalty and compounding of offences under the Payment and Settlement Systems Act, 2007. This revised framework has been issued in light of the Jan Vishwas (Amendment of Provisions) Act, 2023, which has come into force on January 22, 2024.
Key takeaways:
- Reserve Bank is empowered to impose a penalty not exceeding ₹10 lakh or twice the amount involved in such contravention or default where such amount is quantifiable, whichever is more, in case of contraventions / defaults of the nature mentioned in sub-sections (2), (3) and (6) of section 26* of the PSS Act.
- Where such contravention or default is a continuing one, a further penalty up to ₹25,000/- for every day after the first during which the contravention or default continues, can also be imposed.
- The designated authority for imposing monetary penalty and compounding of contraventions will be a (i) Committee comprising three Executive Directors in respect of cases handled by Central Office of Enforcement Department and (ii) Committee comprising Regional Director and two senior officers at the Regional Office of Enforcement Department.
- Only material contraventions will be taken up for enforcement action in the form of imposition of monetary penalty or compounding of offences. The materiality of a contravention would be determined based on various factors including :
- Severity of contravention in terms of degree of breach of norms / limits (isolated, localised, extensive, widespread);
- Period and frequency of a similar contravention during the past five years;
- Seriousness of the contravention, percentage of amount involved in the contravention vis-à-vis total value of transactions handled by the contravener during the period under consideration;
- Amount involved in the contravention and
- Submission of wrong / false / incomplete compliance.
- The process flow for imposing monetary penalties has also been laid down
- The eligibility for compounding of contributions are also provided along with procedure for compounding offences.
Please refer to the hyperlink below for a detailed read of the notification.
Source: Reserve Bank of India
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- *wilfully makes a statement which is false in any material particular or wilfully omits to make a material statement to RBI [section 26(2)]
- contravention of any provisions of the PSS Act or of any regulation, directions / instructions made thereunder, (b) non-compliance with direction pertaining to maintenance of net worth requirements, etc., (c) non-compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) norms, (d) non-compliance with direction pertaining to maintenance of nodal / escrow accounts, (e) breach of limits in loading, fund transfer, etc. of PPIs [section 26(6)]
- failure to produce / furnish any statement, information, returns or other 3 documents to RBI or to answer any question relating to the operation of payment systems [section 26(3)]
