1.Payment and Settlement Systems Act Provisions (Payment Systems Law)
What & Where
Legislation; Payment and Settlement Systems Act, 2007 regulates all payment systems across India
Authority; Reserve Bank of India empowered for authorisation, supervision, enforcement
Process; Act grants legal netting & settlement finality, fostering stable, efficient, consumer-safe payments
Quick Facts for MCQs
Legal & Policy
- Objective; ensure financial stability, efficiency, consumer protection within national payment ecosystem
- Provision; establishes netting, settlement finality as legally enforceable concepts
- Clarification; key terms defined—payment system, instruction, obligation, settlement
Regulatory Powers
- Authorization; RBI may grant, refuse, suspend licences for payment systems
- Enforcement; RBI conducts inspections, can direct corrective measures, impose monetary penalties
- Compounding; central bank empowered to compound offences, avoiding protracted court proceedings
Scope & Exemptions
- Inclusion; Act spans funds, securities, forex, derivative settlement infrastructures
- Extension; applies to FMIs like central counterparties and trade repositories
- Exclusion; activities under stock exchanges remain outside PSS Act ambit
Key Data Points
| Feature | Data-Point |
|---|---|
| Enactment year | 2007 |
| Admin authority | Reserve Bank of India |
| Mandatory authorisation | Required before operating any payment system |
| Penalty ceiling | ₹10 lakh or 2× contravention amount, whichever higher |
| Compounding | RBI may settle non-imprisonable offences out of court |
| Oversight body | BPSS, committee of RBI Central Board |
| Coverage | Card networks, money transfers, FMIs (CCP, SSS, TR) |
| Exemption clause | Stock exchanges & their clearing corps (Sec 34) |
| Latest tweak (2024) | Stricter norms for penalties & compounding issued by RBI |
Related UPSC Prelims PYQs
Consider the following statements:
Which one of the following activities of the Reserve Bank of India is considered to be part of ‘sterilization’?








