Designated Authority/Authorization as per Payment & Settlement Systems Act, 2007

The Payment and Settlement Systems Act, 2007 (PSS Act) designates the Reserve Bank of India (RBI) as the designated authority for the regulation and supervision of payment and settlement systems in India. The RBI has delegated this authority to the Payment and Settlement Systems Board (PSSB).

The PSSB is responsible for:

  • Advising the RBI on matters relating to payment and settlement systems
  • Overseeing the development and efficient functioning of payment and settlement systems
  • Ensuring that payment and settlement systems are in compliance with the PSS Act

The PSSB has the power to:

  • Issue directions to payment system operators
  • Inspect payment system operators
  • Take disciplinary action against payment system operators

The PSSB may also designate payment systems as being of systemic importance. This means that these payment systems are considered to be critical to the smooth functioning of the financial system. The RBI has designated the following payment systems as being of systemic importance:

  • The National Electronic Funds Transfer (NEFT) system
  • The Real Time Gross Settlement (RTGS) system
  • The Clearing Corporation of India (CCIL)
  • The Indian Financial Network (INFINET)

In order to operate a designated payment system, a payment system operator must obtain authorization from the RBI. The RBI will grant authorization if it is satisfied that the payment system operator has the necessary systems and controls in place to ensure the safety and soundness of the payment system.

MCQs on Designated Authority/Authorization as per Payment & Settlement Systems Act, 2007

  1. Which of the following is the designated authority for the regulation and supervision of payment and settlement systems in India?
    • The Reserve Bank of India (RBI).
    • The Ministry of Finance.
    • The Securities and Exchange Board of India (SEBI).
    • The Competition Commission of India (CCI).

The answer is (a). The Reserve Bank of India (RBI) is the designated authority for the regulation and supervision of payment and settlement systems in India.

  1. What is the role of the Payment and Settlement Systems Board (PSSB)?
    • To advise the RBI on matters relating to payment and settlement systems.
    • To oversee the development and efficient functioning of payment and settlement systems.
    • To ensure that payment and settlement systems are in compliance with the PSS Act.
    • All of the above.

The answer is (d). All of the above are the roles of the Payment and Settlement Systems Board (PSSB).

  1. What is a designated payment system?
    • A payment system that is designated by the RBI as being of systemic importance.
    • A payment system that is regulated by the RBI.
    • A payment system that is used by banks.
    • A payment system that is used by the government.

The answer is (a). A designated payment system is a payment system that is designated by the RBI as being of systemic importance.

  1. What is the requirement for operating a designated payment system?
    • The payment system operator must obtain authorization from the RBI.
    • The payment system operator must have the necessary systems and controls in place to ensure the safety and soundness of the payment system.
    • Both (a) and (b).

The answer is (c). Both (a) and (b) are requirements for operating a designated payment system.