Payment settlement act

Payment and Settlement Systems Act, 2007 provides for the regulation and supervision of payment systems in India and designates the Reserve Bank of India (Reserve Bank) as the authority for that purpose and all related matters. 

The PSS Act, 2007 received the assent of the President on 20th December 2007 and it came into force with effect from 12th August 2008.

The Act also provides the legal basis for “netting” and “settlement finality”.

According to a survey, the ratio of e-payments to paper based transactions has considerably increased between 2004 and 2008.

For quick service click: https://enterslice.com/payments-banks-license

GET FREE CONSULTANCY
Helpline: [phone]
Email: [email protected]
Website: www.enterslice.com

1. PAYMENT SETTLEMENT
ACT 2007
www.enterslice.com

2. INTRODUCTION
•PaymentandSettlementSystemsAct,2007providesfortheregulationand
supervisionofpaymentsystemsinIndiaanddesignatestheReserveBankofIndia
(ReserveBank)astheauthorityforthatpurposeandallrelatedmatters.
•ThePSSAct,2007receivedtheassentofthePresidenton20thDecember2007
anditcameintoforcewitheffectfrom12thAugust2008.
•TheActalsoprovidesthelegalbasisfor“netting”and“settlementfinality”.
Accordingtoasurveytheratioofe-paymentstopaperbasedtransactionshas
considerablyincreasedbetween2004and2008.

3. PAYMENT SYSTEM
PAYMENT SYSTEM
•Itmeansasystemthatenablespaymenttobeeffectedbetweenapayer&a
beneficiary,involvingclearing,paymentorsettlementservicebutdoesnot
includeastockexchange.
•Itincludesthesystemwhichenablescreditcardoperations,debitcardoperations
smartcardoperations,moneytransferoperationsorsimilaroperations;
•TheReserveBankofIndiaisdoingitsbesttoencouragealternativemethodsof
paymentswhichwillbringsecurityandefficiencytothepaymentssystemand
makethewholeprocesseasierforbanks.

4. IMPORTANCE OF PAYMENT & SETTLEMENT
SYSTEM
•Paymentandsettlementsystemsareanimportantpartoftheeconomicand
financialinfrastructure,asbyensuringthesafe,effectiveandtimelysettlement
offinancialtransactionstheymakeakeycontributiontothesmoothfunctioning
offinancialmarkets,andtherebytogeneraleconomicstabilityandefficiency.
•Inthewidersense,paymentandsettlementsystemsconsistofasetof
instruments,procedures,rulesandtechnologicalsupportfortransmitting
informationandsettlingcashorfinancialinstrumentsbetweentheirparticipants.
•Inanarrowersense,paymentandsettlementsystemsentailaformal
arrangementbasedonaprivatecontractorlegislation,withmultiple
membership,standardisedarrangementsandcommonrules,forthe
transmission,clearing,nettingand/orsettlementofmonetaryobligationsand
financialinstrumentsbetweentheirparticipant

5. ELECTRONIC PAYMENT & SETTLEMENT SYSTEMS
IN INDIA
•TheIndianbankingsectorhasbeengrowingsuccessfully,innovatingandtryingtoadopt
andimplementelectronicpaymentstoenhancethebankingsystem.ThoughtheIndian
paymentsystemshavealwaysbeendominatedbypaper-basedtransactions,e-payments
arenotfarbehind.Eversincetheintroductionofe-paymentsinIndia,thebankingsector
haswitnessedgrowthlikeneverbefore.
•Theratioofe-paymentstopaperbasedtransactionshasconsiderablyincreasedbetween
2004and2008
•TheRBIhasplayedapivotalroleinfacilitatinge-paymentsbymakingitcompulsoryfor
bankstoroutehighvaluetransactionsthroughRealTimeGrossSettlement(RTGS)and
alsobyintroducingNEFT(NationalElectronicFundsTransfer)

6. ELECTRONIC PAYMENT SYSTEM
•Simpler
•Safer
•Faster
•CostEffective
•EnhancedReach
•Eco-Friendly

7. WHY EPS
CASH / PAPER ELECTRONIC
•PhysicalMovement of cash / paper instruments•Electronic Movement
•OperationalCost is very high•OperationalCost is Low
•More time Required•Less time Required
•As volume increases , Logistics to be increased•No such requirement
•Geographical Restrictions •No such restrictions, Paymentanywhere in World

8. BENEFITS
•Bills / EMIs paid automatically
•No frequent writing of cheques/ standing in the queue
•Easy reconciliation
•Cost Effective
•No interaction between payer & payee

9. PAYMENT & SETTLEMENT SYSTEM AUDIT
•AsperRBIrequirements,allauthorisedpaymentsystemoperatorsshouldget
theirsystemauditedperiodically.
•Theauditistoensurethatthetechnologydeployedtooperatethepayment
systemisbeingoperatedinsafe,secure,sound&efficientmanner.

10. India supports a variety of electronic payments and settlement system,
both Gross as well as Net settlement systems.
EPS VARIANTS
NEFT ( National Electronic Fund Transfer )
RTGS ( Real Gross Time Settlement )
IMPS ( Immediate Payment Service )
Alternate Payment Channel
•ATM
•Internet Banking

11. NEFT
•The National Electronic Fund Transfer(NEFT) system is a nationwide system that
facilitates individuals, firms and corporates to electronically transfer funds from
any bank branch to any individual, firm or corporate having an account with any
other bank branch in the country.
•Highly secured –smart card based access
•Positive Confirmation of credits to the originator.

12. RTGS
•RealTimeGrossSettlementisafundstransfermechanismwheretransferof
moneytakesplacefromonebanktoanotherona'realtime'andon'gross'basis
•Minimumvalueoftransactionshouldbe₹2,00,000
•Fortransactionsof₹2lakhsto₹5lakhs-upto₹25pertransaction
•Creditonrealtimebasis

13. IMPS
•ImmediatePaymentService(IMPS)isaservicethroughwhichmoneycanbe
transferredimmediatelyfromoneaccounttotheotheraccount,withinthesame
bankoraccountsacrossotherbanks.
•Thisfacilitycanbeavailed24X7andonallpublicandbankholidaysincludingRBI
holidays.
•Mostbanksofferthisfacilityfreeofcosttoencouragepaperlesspaymentsystem

14. ATM
•AutomatedTellerMachinesservemanyotherpurposes,apartfromfunctioning
asterminalsforwithdrawalsandbalanceinquiries,suchaspaymentofbills
throughATM’s,applicationsforchequesbooksandloanscanalsobemadevia
ATM’s.
•WithdrawalfromanybankATMmadefreeupto3timesamonth

15. ISSUE OF AUTHORISATION
TheReserveBankmay,ifsatisfied,afteranyinquiryundersection6orotherwise,
thattheapplicationiscompleteinallrespectsandthatitconformstothe
provisionsofthisActandtheregulationsissueanauthorizationforoperatingthe
paymentsystemunderthisActhavingregardtothefollowingconsiderations,
namely:-
•Theneedfortheproposedpaymentsystemortheservicesproposedtobe
undertakenbyit;
•Thefinancialstatus,experienceofmanagementandintegrityoftheapplicant;
•Monetaryandcreditpolicies

16. CONT……
•Interestsofconsumers,includingthetermsandconditionsgoverningtheir
relationshipwithpaymentsystemproviders;
•EveryapplicationforauthorizationshallbeprocessedbytheReserveBankas
soonaspossibleandanendeavorshallbemadetodisposeofsuchapplication
withinsixmonthsfromthedateoffilingofsuchapplication.

17. SAFETY CONCERNS IN DIGITAL PAYMENTS
Demonetization , subsequent cash crunch & subsequent government agenda to
push for digital payments has brought the safety & privacy concerns of digital
payments.
We note that there are 3 kinds of risks that are unique to digital payments.
1.Device Related Risk
If someone loses the mobile & there is no password protection of the phone, the e-
wallet may be compromised.
2. Access Risk

18. OFFENCES & PENALTY
•Under the PSS Act 2007, Operating a payment system without authorization ,
failure to produce the statements , non-compliance of directions of Reserve Bank
violations of any of the provisions of the Act, Regulations, order, directions etc.,
are offences punishable for which Reserve Bank can initiate criminal prosecution.
•Reserve Bank is also empowered to impose fine for certain contraventions under
the Act( Under section 26 & 30 )
•Imprisonment for a term extended for 2 years or with fine which may extend to
twice the amount of the electronic funds

19. FOREGIN ENTITIES UNDER PAYMENT SYSTEM
•ThePAYMENT&SETTLEMENTSYSTEMdoesnotprohibitforeignentitiesfrom
operatingapaymentsysteminIndia.TheActdoesnotdiscriminate/differentiate
betweenforeignentitiesanddomesticentities.Foreignentitiesviz.,card
networkslikeMasterCard(Singapore),VisaWorldwidePte.Limited(Singapore),
etc.areauthorisedunderthePSSActandoperatingcardschemesinIndia.

20. ThankYou
www.enterslice.com