In a Circular dated 10th January, 2020, the Reserve Bank of India (“RBI”) has revised the framework for imposing monetary penalty on payment system operators/banks under the Payment and Settlement Systems Act, 2007.
The revised framework centres around objectivity and transparency in the decision-making process.
Please note that Annex 1 of the Circular lays down a table showing the changes made to the existing framework and Annex 2 lays down the salient features revised framework.
Previously, in a circular dated 20th October, 2016 the RBI had advised the framework for imposition of monetary penalty for offences under Sections 30 and 31 of the Payment and Settlement Systems (PSS) Act, 2007, dealing with the power of the RBI to impose fines and power of the RBI to compound offences respectively.
However, with rapid developments in the payment system landscape and increased adoption of technology, availability of payment products, entry of more non-bank players, dis-intermediation, significant surge in turnover, etc. it became important to ensure a safe and secure payment systems along with a regulatory conformity by the stakeholders.
In light of this the RBI has decided to revise the process of levy of penalty on payment system operators.
Source: Reserve Bank of India