Make regulation of payments independent from the function of central banking

The Committee weighed two options on how best this be implemented:

1. create an new payments regulator, or
2. make the current Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) within RBI more independent.

While both the options would serve the intended objective, the Committee recommends that the BPSS be given an independent status which it today lacks by being a sub-committee of the Central Board of RBI. The statutory status of the new Board, within the overall structure of RBI, called Payments Regulatory Board (PRB) should be enshrined in the Payments and Settlement Systems Act, 2007

MoF : 30 days

1. Budget announcement
2. Payments Regulatory Board yet to be constituted, working.

Update the current Payments and Settlement Systems Act, 2007 to include explicit mandate for

1. competition and innovation,
2. open access and interoperability,
3. consumer protection including penalties and independent appeal mechanism,
4. regulations on systemic risks,
5. data protection and security and
6. a process of regulatory governance.

The Committee has provided drafting instructions for the new Payments and Settlement Systems Act and this may be initiated at the earliest

MoF : 30 days

Implementation by MoF: Finalisation of amendment bill and placing the same before the Union Cabinet may be done in 30 days

Promote digital payments and receipts within Government

1. adopting digital payments for all its needs.
2. withdraw all charges levied by Government department and utilities on digital payments and bear the cost of such transactions.
3. mandate government departments and agencies to provide option to consumers to pay digitally.
4. incentivise consumers to make payments (including payment of fines and penalties) to Government electronically by giving a discount or cash back.
5. enable consumers to make payments (including taxes) to Government through suitable digital means like cards and wallets.
6. special emphasis to promote digital payments for recurring low value transactions
7. reduce custom duties on payments acceptance equipment.

Create a fund proposed as DIPAYAN from savings generated from cash-less transactions to expand digital payments. Build audit capability to measure savings

Implementation by MoF, Ministry of Social Justice, Ministry of tribal Affairs and Ministry of Development of North Eastern Region. A time period of 60 days may be considered for initiating implementation by user agencies

Create a ranking and reward framework to encourage and recognise government departments, State Governments, districts and panchayats and other market participants who lead the efforts on enabling digital payments

Implementation by NITI Aayog along with State Governments. Development of the framework maybe achieved in 60-90 days

Implement other measures to promote digital payments including

1. promoting Aadaar based eKYC and paperless authentication (including where Permanent Account Number (PAN) has not been obtained)
2. providing disincentives for usage of cash.
3. creating awareness and transparency on cost of cash.

Implementation by MoF, UIDAI, CBDT, Telecom Regulatory Authority of India (TRAI), Ministry of HRD, DoPT and RBI. May be initiated over 60-90 days.

Consider outsourcing the function of operation of payment systems like Real Time Gross Settlement (RTGS) and National Electronic Fund Transafer (NEFT). While moving RTGS to a separate operator is not envisaged for now – a cost benefit analysis may be initiated as an initial step. Overtime, multiple payment system operators should be encouraged and payment systems should be operated by market entities

Consultation paper may be released over 180 days.

Upgrade payment systems like RTGS and NEFT to operate on 24x7 basis in due course of time RBI should progressively increase their timings over due course

A consultation paper may be released over 90 days

Allow non-bank PSPs to directly access payment systems –

Regulations may be released for consultation over 60 days

Require NPCI, to be payments centric in its ownership and objectives Ownership of NPCI should be diversified widely to include more banks and include non-banks. Its Board should be represented by majority public interest directors and include shareholder directors. NPCI should be allowed to function independently

Regulations may be released for consultation over 60 days

Enable payments to be inter-operable between bank and non-banks as well as within non-banks. Mobile number and Aadhaar based fully inter-operable payments should be prioritised

NPCI may enable this on its platforms over 60 days.

Create a formal mechanism to enable innovations and new business models

Consultation paper may be released over 90-120 days

Implement other measures to promote digital payments including issuing regulations on Systemically Important Payment System (SIPS) and Systemically Important Financial Institutions (SIFIs), growing acceptance network, enabling faster and cheaper credit and promoting cross border payments

Regulations may be released for consultation over 60-180 days. The RBI may within two weeks of releasing this Report, develop a comprehensive metric to quantitatively measure and monitor the enhancement of digital payment services in India