- Payment system
- Concept of payment system and settlement
- Payment and settlement systems in India
It has been a moment that there has been a buzz around the rising thought of economic technology (fintech), which appears to be evolving at Associate in Nursing unthinkable speed. The technological development happening globally has compelled the historically cash-driven Indian economy to reply promptly to the fintech opportunities. The trendy payment systems have overcome the disadvantage of the normal mode of money based mostly payments wherever handing of money was the foremost cumbersome a part of all group activities. It’s a known proven fact that the general economic potency and stability of any country depends on the payment and settlement system therein country. As a result, the regulators in our country, together with the financial organization, have additionally been revisiting their operative model and policies often, to make sure and do the event of national payment systems. The regulators need to closely safeguard the holiness of payment systems, primarily from the point of view of general risk, risk of fraud, etc. Specifically, it’s the responsibility of the financial organization of any country, that’s to mention the banking company of India (RBI) for our country, to make sure and do the event of national payment systems.
Concept of Payment System and Settlement
As per the PSS Act, 2007, ‘Settlement’ suggests that the settlement of payment directions received and these embrace settlement of securities, interchange or derivatives or different transactions. The settlement will occur either on an internet basis or on a gross basis. Further, the term ‘netting’ has been outlined because of the determination by the system supplier of the quantity of cash or securities, due or collectible or deliverable, as a result of setting off or adjusting, the payment obligations or delivery obligations among the system participants, together with the claims and obligations arising out of the termination by the system supplier, on the financial condition or dissolution or completing of any system participant or such different circumstances because the system supplier could specify in its rules or rules or bye-laws (by no matter name called), of the transactions admitted for settlement at a future date so solely an internet claim be demanded or an internet obligation be closely-held.
The PSS Act,, 2007 additionally lawfully acknowledges settlement determinateness and therefore the loss allocation among system participants and payment system, wherever the foundations give for this mechanism. It states that a settlement, whether or not gross or internet, are going to be final and irrevokable as before long because the cash, securities, interchange or derivatives or different transactions collectible as a result of such settlement is set, whether or not or not such cash, securities or interchange or different transactions is truly paid. Just in case a system participant is asserted insolvent, or is dissolved or is tense, no different law will have an effect on any settlement that has become final and irrevocable and therefore the right of the system supplier to apply the collaterals contributed by the system participants towards settlement or different obligations.
Payment and Settlement Systems In India
Under the PSS Act, 2007, 2 rules are created by the run, namely, the Board for Regulation and direction of Payment and Settlement Systems rules, 2008 (BPSS rules) and therefore the Payment and Settlement Systems Regulations, 2008 (‘PPS rules, 2008’). Each of these rules came into force in conjunction with the PSS Act, 2007 on twelfth August 2008. They give the required statutory backing to the run for over viewing the payment and settlement systems within the country.
The Board for Regulation and direction of Payment and Settlement Systems (BPSS), a sub-committee of the Central Board of the run is that the highest dogmas body on payment systems. The BPSS is scattered for authorizing, prescribing policies, and setting standards for regulation and direction of all the payment and settlement systems within the country. The Department of Payment and Settlement Systems of the run is the Secretariat to the Board and executes its directions. The BPSS rules deal with the composition of the BPSS, its powers and functions, the travail of powers on behalf of BPSS, conferences of the BPSS and assemblage, the constitution of Sub-Committees/Advisory Committees by BPSS, etc. The BPSS exercises the powers on behalf of the run, for regulation and direction of the payment and settlement systems beneath the PSS Act, 2007.
The PPS rules, 2008 lays down the procedural needs for commencing or carrying on a payment system. It covers matters like the sort of application for authorization for commencing on a payment system and grant of authorization, payment directions, and determination of standards of payment systems. It additionally more lays the regular compliance needs, like furnishing of returns, furnishing of accounts and balance sheets by system supplier, etc to the run.