Government, RBI turf war over payments regulator hots up

Government, RBI turf war over payments regulator hots up

AgenciesUpdated: Wednesday, May 29, 2019, 05:16 AM IST
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New Delhi: The turf war over regulating payments systems seems to be intensifying with the government claiming that the Reserve Bank of India’s dissent has already been taken into account in the inter-ministerial report. “We have already taken into account RBI’s dissent while preparing the report,” a senior government official said.

In a surprise move, RBI on Friday released its dissent note to the recommendations of the inter-ministerial committee for finalising amendments to the Payment & Settlement Systems Act, 2007. In its dissent note, RBI said the Payments Regulatory Board must remain within the central bank and should be headed by the RBI governor with casting vote.

The inter-ministerial committee, headed by Economic Affairs Secretary Subhash Chandra Garg, recommended an independent regulator, chaired by a government appointee finalised in consultation with the RBI. Asked if the committee would reconsider its recommendations in view of RBI’s opposition, the official said, “We have already submitted the final report. No changes can be made now.”

The central bank said that the proposed structure of the board does not conform to the announcements made in the Finance Bill, 2017, where the suggested composition was three members from the RBI and three government nominees, with the central bank’s governor as the chairperson.

The committee was of the opinion that having a whole-time chairperson and whole-time members will provide for a “slightly broad based composition” of the regulatory board. The committee observed that if the board was headed by the RBI governor, it would mean that the chairperson would not be whole-time. RBI Executive Director S Ganesh Kumar, who represented the central bank in the committee, submitted a dissent note to the recommendations.

“Payment systems are a subset of currency, which is regulated by the RBI. The overarching impact of monetary policy on payment and settlement systems, and vice-versa, provides support for regulation of payment systems to be with the monetary authority,” RBI note said. The note also said that there are certain payment systems like cards which are issued by banks globally. Dual regulation over such instruments will not be desirable. In its submission to the committee, RBI said that the proposed model for regulation can have a cascading effect in the transmission of monetary policy.

RBI, CBI views sought on bill to ban ponzi schemes
The Parliamentary Standing Committee on Finance will invite Reserve Bank of India Governor Urjit Patel and Central Bureau of Investigation Director Alok Verma on Nov 12 to give oral evidence on the Banning of Unregulated Deposit Schemes Bill 2018, panel head Veerappa Moily said on Tuesday.

The bill aims at tackling the menace of illicit deposit-taking activities across the country, also known as ponzi schemes. The standing committee heard Securities and Exchange Board of India Chairman Ajay Tyagi’s views on the issue.

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