RBI Sets Up Payments Regulatory Board

In a significant structural shift, the Reserve Bank of India (RBI) has set up a new six-member Payments Regulatory Board (PRB) to oversee and regulate India’s payment systems. This move comes at a time when India’s digital payment landscape is expanding rapidly, requiring more focused and adaptable oversight. The PRB replaces the earlier Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) and will function with broader authority and a more inclusive structure, ensuring transparency, efficiency, and security in both domestic and cross-border payment systems.

Legal Basis and Structural Changes

• The PRB derives its authority from the Payment and Settlement Systems Act, 2007, which grants legal power for the regulation of payment and settlement systems across India.
• Unlike its predecessor, the PRB is not just a sub-committee of the RBI’s Central Board but a distinct entity supported by the Department of Payment and Settlement Systems (DPSS), which will now report directly to this board.
• This transition signals a more autonomous and robust regulatory framework that aligns with India’s ambitions to lead in digital payments globally.

Composition: A Blend of RBI and Government Leadership

The Payments Regulatory Board is chaired by RBI Governor Sanjay Malhotra and includes five other members. The composition ensures a balance of expertise and oversight from both the central bank and the central government.

RBI Members

• The Deputy Governor in charge of payment systems
• An Executive Director responsible for payment systems

Government Nominees

• Secretary of Financial Services
• Secretary of Electronics & IT
• Aruna Sundararajan, former Telecom Secretary

This diverse composition aims to integrate technological, financial, and policy perspectives, ensuring the PRB remains responsive to emerging challenges in payment systems.

Key Decision Rules

• Decisions by majority vote
• In the event of a tie, the Chairperson (or Deputy Governor) has a casting vote
• Meetings to be held at least twice a year
• Decisions via circulation permitted when authorized by the chair

The Principal Legal Adviser of RBI serves as a permanent invitee, ensuring all regulatory decisions are legally sound.

Functions: Comprehensive Oversight of All Payment Systems

The PRB is tasked with regulating and supervising all payment systems, including,

• Electronic (e.g., UPI, NEFT, RTGS, IMPS, card networks)
• Non-electronic (e.g., cheque clearing systems)
• Domestic and cross-border transactions
• Public and private payment platforms

The scope of the PRB reflects the growing complexity and volume of payment flows in India. From traditional banking channels to fintech-led innovations, the Board will ensure security, interoperability, and resilience across the ecosystem.

Key Takeaways

• PRB constituted by RBI in 2025, replacing the BPSS
• Legal backing from Payment and Settlement Systems Act, 2007
• Composed of 6 members: 3 from RBI, 3 government nominees
• Chaired by RBI Governor Sanjay Malhotra
• Supports oversight of all payment systems – electronic, non-electronic, domestic, and cross-border
• Supported operationally by Department of Payment and Settlement Systems (DPSS)