RBI notifies six-member payments regulatory board; includes govt nominees for the first time

The Governor, Deputy Governor, and the nominated RBI official will serve as ex officio members.

The Reserve Bank of India (RBI) has officially notified the formation of a new six-member Payments Regulatory Board (PRB) to regulate and supervise payment systems in the country, replacing the existing Board for Regulation and Supervision of Payment and Settlement Systems (BPSS).

As per the RBI notification published in the Gazette of India on May 21, the new PRB will be headed by the RBI Governor and will, for the first time, include three nominees from the central government. The other members will be the Deputy Governor in charge of Payment and Settlement Systems, one RBI official nominated by the Central Board, and the three government nominees. The Governor, Deputy Governor, and the nominated RBI official will serve as ex officio members.

The PRB may also invite domain experts in payment and settlement systems, IT, and law to attend its meetings as permanent or ad hoc invitees. The Principal Legal Adviser of the RBI will be a permanent invitee. The Board is required to meet at least twice a year.

The move, according to PTI, comes after years of deliberation and debate. In 2018, the government had proposed an independent regulator for payments via an inter-ministerial panel headed by the Economic Affairs Secretary. However, PTI added, the RBI strongly opposed the idea, issuing a ‘Dissent Note’ insisting that the regulator must remain within the central bank’s ambit and be chaired by the RBI Governor to ensure seamless functioning and oversight.

“The Payments Regulatory Board (PRB) must remain with the Reserve Bank and be headed by the Governor, Reserve Bank of India... with a casting vote for the Governor,” the RBI had said in its dissent at the time. It also flagged that the proposed composition was inconsistent with the Finance Bill announcement made by the Finance Minister.

The latest notification clarifies that each PRB member will have one vote. Decisions will be taken by majority vote, and in the event of a tie, the Chairperson, or the Deputy Governor in their absence, will have a casting vote.

Commenting on the development, Ranadurjay Talukdar, Partner and Payments Sector Leader, EY India, told PTI: “India has never seen payments regulated outside of the RBI. RBI oversight over the years has ensured stringent governance of systemic risks arising from the payments ecosystem — setting up appropriate guardrails to protect consumer interests (such as grievance redressal and KYC guidelines) and infrastructural resilience (such as the cybersecurity framework for PSOs).”

However, Talukdar added that the formation of a more representative PRB could also pave the way for innovation. “Whether by expanding tokenisation to enable device-based payments across schemes or by introducing newer entities like NUEs to balance ever-growing digital payments volumes, a PRB with the right industry representation can lead to greater innovation,” he told PTI.