THE PAYMENT AND SETTLEMENT SYSTEMS ACT, 2007 ACTNO. 51 OF 2007 [20th December, 2007.] An Act to provide for the regulation and supervision of payment systems in Indiaand to designate the Reserve Bank of India as the authority for that purpose and for matters connected therewith or incidental thereto.
What is payment and Settlement Systems Act?
The Act empowers RBI (apex institution) to deal with the matters relating to that purpose and other purposes for which RBI is authorized to constitute a central authority known as the Board for Regulation and Supervision of Payment and Settlement Systems (BPSS). The Payment and Settlement Systems Regulations, 2008 was also made by RBI.
What is the PSS Act 2007?
Under the PSS Act, 2007, two Regulations have been made by the Reserve Bank of India, namely, the Board for Regulation and Supervision of Payment and Settlement Systems Regulations, 2008 and the Payment and Settlement Systems Regulations, 2008. Both these Regulations came into force along with the PSS Act, 2007 on 12th August 2008. Q 4.
What is the board for regulation and supervision of payment and settlement?
To exercise its powers and perform its functions and discharge its duties, the RBI is authorized under the Act to constitute a committee of its central board, which is known as the Board for Regulation and Supervision of Payment and Settlement Systems (BPSS). The Act also provides the legal basis for ‘netting’ and ‘settlement finality’.
What is a payment system under PSS?
The Section 2 (1) (i) of the PSS Act 2007 defines that a payment system enables payment to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them, but does not include a stock exchange.
What are the objectives of the Payment and Settlement Systems Act?
Who wrote the 2007 Payment and Settlement Act?
What is a payment system?
What are the two regulations made under the Act through RBI?
What is a revocation of a system provider?
What is Section 24 of the Act?
When did the Payment and Settlement Act come into force?
See 4 more
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What is the payment and settlement Act 2007?
India Code: Payment and Settlement Systems Act, 2007. Long Title: An Act to provide for the regulation and supervision of payment systems in India and to designate the Reserve Bank of India as the authority for that purpose and for matters connected therewith or incidental thereto.
What is payment and settlement system?
Settlement in "real time" means payment transaction is not subjected to any waiting period. "Gross settlement" means the transaction is settled on one to one basis without bunching or netting with any other transaction. Once processed, payments are final and irrevocable.
What is payment and settlement system of RBI?
Payment and settlement systems play an important role in improving overall economic efficiency. They consist of all the diverse arrangements that we use to systematically transfer money-currency, paper instruments such as cheques, and various electronic channels.
Why do we need payment and settlement?
The need for payments and settlements is as old as the need for goods and services. The earliest known Payment and Settlement System (PSS) was the barter system facilitating exchange through goods and / or services.
Who is part of payment and settlement?
The Reserve Bank of India (India's Central Bank) maintains this payment network. Real-time gross settlement is a funds transfer mechanism where transfer of money takes place from one bank to another on a 'real time' and on 'gross' basis. This is the fastest possible money transfer system through the banking channel.
What do you mean by settlement system?
Settlement systems – securities infrastructures – refer to multilateral arrangements and systems that are used for the clearing, settlement and recording of payments, securities, derivatives or other financial transactions. Securities settlement systems are used for post-trade processing.
What is the role of payment system?
Payment & settlement systems are mechanisms established to facilitate the clearing and settlement of monetary and other financial transactions. Secure, affordable & accessible payment systems and services promote development, support financial stability, and help expand financial inclusion.
What was the reason behind the evolution of the payment and settlement services Act 2007?
The objectives of The Payment and Settlement Systems Act, 2007 are: To provide regulation and supervision of payment methods in India. To designate RBI, the apex institution as authority for purposes related to payment systems in India.
Who regulates Paymentbanks?
The Reserve Bank of India (RBI)The Reserve Bank of India (RBI) issues licences to entities to carry on the business of banking and other businesses in which banking companies may engage, as defined and described in Sections 5 (b) and 6 (1) (a) to (o) of the Banking Regulation Act, 1949, respectively.
What is the difference between settlement and payment?
Once a transaction has been approved, settlement is the second and final step. This is when the issuing bank transfers the funds from the cardholder's account to the payment processor, who then transfers the money to the acquiring bank. The business will then receive the authorized funds in its merchant account.
What is not a part of payment and settlement system?
Section 2(1) (i) of the PSS Act 2007 defines a payment system to mean a system that enables payment to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them, but does not include a stock exchange (Section 34 of the PSS Act 2007 states that its provisions will ...
How many payment systems are there in India?
With the aim of touching lives of every Indian, NPCI has rolled out a variety of innovative retail payment products viz., IMPS, RuPay card scheme, UPI, NACH, Aadhaar-enabled Payments System (AePS), Aadhaar Payments Bridge System (APBS), NETC, *99# (USSD based) and BBPS.
What is payment clearing and settlement?
Clearing involves network operators routing messages and other information among financial institutions to facilitate payments between payers and payees. Interbank settlement is the discharge of obligations that arise in connection with faster payments either in real-time or on a deferred schedule.
What is settlement in banking?
Settlement can be defined as the process of transferring of funds through a central agency, from payer to payee, through participation of their respective banks or custodians of funds.
What is settlement risk in payment system?
The settlement risk is the risk that a counterparty, whether a participant or other entity, will have insufficient funds to meet its financial obligations as and when expected, although it may be able to do so at a future date. This risk could further lead to principal risk. (
How are payments cleared and settled?
Settlement involves exchanging funds between the two banks, while clearing can end without any interbank money movement. In the clearing process, funds move between the recipient's or sender's bank account and their bank's reserves.
The Payment and Settlement Systems Act, 2007|Legislative Department ...
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Payment and Settlement Systems Act, 2007 – FAQ - TaxGuru
(Update Date 04.08.2016) Q 1. When did Payment and Settlement Systems Act, 2007 (PSS Act, 2007) came into effect? Ans. 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. Q 2. What is the objective of the PSS Act, […]
Payment and Settlement Systems Regulations, 2008
April 14, 2015 Dear All Welcome to the refurbished site of the Reserve Bank of India. The two most important features of the site are: One, in addition to the default site, the refurbished site also has all the information bifurcated functionwise; two, a much improved search – well, at least we think so but you be the judge.
The Payment and Settlement Systems Act, 2007 - Indian Kanoon
The Board for Regulation and Supervision of Payment and Settlement Systems constituted under clause (i) of sub-section (2) of section 58 of the Reserve Bank of India Act, 1934 shall be deemed to be the Board constituted under this section and continue accordingly until the Board is reconstituted in accordance with the provisions of this act and shall be governed by the rules and regulations ...
Reserve Bank of India - Payment and Settlement Systems Act, 2007
Apr 29, 2022: Payment and Settlement Systems Act, 2007 As Amended up to 2019 : 306 kb
India Code: Payment and Settlement Systems Act, 2007
Act ID: 200751: Act Number: 51: Enactment Date: 2007-12-20: Act Year: 2007: Short Title: The Payment and Settlement Systems Act, 2007: Long Title: An Act to provide for the regulation and supervision of payment systems in India and to designate the Reserve Bank of India as the authority for that purpose and for matters connected therewith or incidental thereto.
When did the Payment and Settlement Systems Act come into effect?
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. Q2.
What is the Payment and Settlement Systems Regulations 2008?
The Payment and Settlement Systems Regulations, 2008 covers matters like form of application for authorization for commencing/ carrying on a payment system and grant of authorization, payment instructions and determination of standards of payment systems, furnishing of returns/documents/other information, furnishing of accounts and balance sheets by system provider etc.
What is the BPSS?
The BPSS exercises the powers on behalf of the Reserve Bank, for regulation and supervision of the payment and settlement systems under the PSS Act, 2007. The Payment and Settlement Systems Regulations, 2008 covers matters like form of application for authorization for commencing/ carrying on a payment system and grant of authorization, ...
What is BPSS in banking?
Ans. The Board for Regulation and Supervision of Payment and Settlement Systems Regulation, 2008 deals with the constitution of the Board for Regulation and Supervision of Payment and Settlement System (BPSS), a Committee of the Central Board of Directors of the Reserve Bank of India. It also deals with the composition of the BPSS, its powers and functions, exercising of powers on behalf of BPSS, meetings of the BPSS and quorum, the constitution of Sub-Committees/Advisory Committees by BPSS, etc., The BPSS exercises the powers on behalf of the Reserve Bank, for regulation and supervision of the payment and settlement systems under the PSS Act, 2007.
What are the regulations made under the PSS Act, 2007?
Under the PSS Act, 2007, two Regulations have been made by the Reserve Bank of India, namely, the Board for Regulation and Supervision of Payment and Settlement Systems Regulation, 2008 and the Payment and Settlement Systems Regulations, 2008.
What is the PSS Act?
The PSS 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 Reserve Bank is authorized under the Act to constitute a Committee of its Central Board known as the Board for Regulation and Supervision of Payment and Settlement Systems (BPSS), to exercise its powers and perform its functions and discharge its duties under this statute. The Act also provides the legal basis for “netting” and “settlement finality”. This is of great importance, as in India, other than the Real Time Gross Settlement (RTGS) system all other payment systems function on a net settlement basis.
How can payment instructions be communicated?
The payment instruction can be communicated either manually i.e. through an instrument like a cheque ,draft , payment order etc or through electronic means , so that a payment can be made by either a person to the participant in such a system or between two participants. Q8.
What is the PSS Act?
The PSS 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 Reserve Bank is authorized under the Act to constitute a Committee of its Central Board known as the Board for Regulation and Supervision of Payment and Settlement Systems (BPSS), to exercise its powers and perform its functions and discharge its duties under this statute. The Act also provides the legal basis for “netting” and “settlement finality”. This is of great importance, as in India, other than the Real Time Gross Settlement (RTGS) system all other payment systems function on a net settlement basis.
Can the Reserve Bank refuse to grant a grant under the PSS Act?
Ans. Yes, the Reserve Bank can refuse to grant authorization under the PSS Act, 2007.However, the Reserve Bank has to give a written notice to such an applicant giving the reasons for refusal and also a reasonable opportunity of being heard {Section7 (3) of the PSS Act 2007}.
What is the PSS Act?
The PSS 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 Reserve Bank is authorized under the Act to constitute a Committee of its Central Board known as the Board for Regulation and Supervision of Payment and Settlement Systems (BPSS), to exercise its powers and perform its functions and discharge its duties under this statute. The Act also provides the legal basis for “netting” and “settlement finality”. This is of great importance, as in India, other than the Real Time Gross Settlement (RTGS) system all other payment systems function on a net settlement basis.
What is the instrument used to settle the value between the payer and the payee?
• Payment Instruments: Instrument which is used to settle the values between Payer and Payee depending upon the type of transactions (commercial, money transfer, domestic, international, settlement etc) value of transaction (micro to macro) etc.
What is settlement in banking?
Settlement means the settlement of payment instructions received and these include settlement of securities, foreign exchange or derivatives or other transactions. Settlement can take place either on a net basis or on a gross basis. Both netting and gross settlement system are defined under the Act thereon.
What is a payment system?
The Section 2 (1) (i) of the PSS Act 2007 defines that a payment system enables payment to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them, but does not include a stock exchange.
What is payment instruction?
Payment Instruction is defined as any instrument, authorization or order in any form, including by electronic means, to effect a payment by a person to a participant in a payment system or from one participant in such a system to another participant in that system.
How is payment instruction communicated?
The payment instruction can be communicated either manually i.e. through an instrument like a cheque draft, payment order etc. or through electronic means, so that a payment can be made by either a person to the participant in such a system or between two participants.
What is system provider?
All entities operating such systems will be known as system providers. Also, all entities operating money transfer systems or card payment systems or similar systems fall within the purview of a system provider.
Can foreign entities operate a payment system in India?
Are foreign entities allowed to operate a payment system in India? The PSS Act 2007 does not prohibit foreign entities from operating a payment system in India and the Act does not discriminate or differentiate between foreign entities and domestic entities.
What are the objectives of the Payment and Settlement Systems Act?
Objectives. The objectives of The Payment and Settlement Systems Act, 2007 are: To provide regulation and supervision of payment methods in India. To designate RBI, the apex institution as authority for purposes related to payment systems in India. To constitute such regularities by RBI to exercise its power and perform its functions.
Who wrote the 2007 Payment and Settlement Act?
All About The Payment and Settlement System Act, 2007. The Article is written by Shreya Pandey from Banasthali University, Jaipur. The article deals with the Payment and Settlement Act, 2007 its objectives and features of the Act.
What is a payment system?
Payment System- It is a system which enables a payment between a payer and a beneficiary, including clearing, payment, or settlement service, but it does not include a stock exchange. It further explained that the payment system includes a system enabling credit card, debit card, smart card operations, or money transfer operations, etc. Section 34 of the PSS Act states that stock exchange or clearing corporations set up under stock exchange are not applicable under this Act.
What are the two regulations made under the Act through RBI?
The two regulations made under the Act through RBI are Board for Regulation and Supervision of Payment and Settlement Systems Regulations, 2008 and the Payment and Settlement Systems Regulations, 2008.
What is a revocation of a system provider?
The revocation is done if the system provider contravenes any provision of the Act or regulation, or fails to comply with orders directions of the RBI, or violates the terms and conditions under which it has received the authorization. Section 7 empowers the RBI to collect authorization fees.
What is Section 24 of the Act?
Section 24 of the Act prescribes for the system provider to make provisions for the creation of a panel to decide the dispute between the system participants and if any dispute arises between two or more system participants then they shall refer the matter to the panel.
When did the Payment and Settlement Act come into force?
It came into force from 12th August 2008.
Objectives
- The objectives of The Payment and Settlement Systems Act, 2007 are: 1. To provide regulation and supervision of payment methods in India. 2. To designate RBI, the apex institution as authority for purposes related to payment systems in India. 3. To constitute such regularities by …
Important Definitions
- Sec 2(1)deals with the definitions of the important words used in the Act. Payment Obligation- It is an indebtedness which is owned by a participant of the system to the other resulting from clearing or settlement of payment instructions related to funds, securities or foreign exchange or derivatives or other transactions. Payment Instructions- Payment Instruction can be an instrume…
Authorization of Payment System
- According to Section 4 of the PSS Act, only RBI has an authority to operate or commence any payment system and if any person or system providers desire to operate or commence a payment system then he has to apply for authorization from RBI under Section 5 of the Act. The application of authorization shall be made according toForm A under Regulation 3(2) under PSS Regulation…
Foreign Entities
- The Act doesn’t differentiate or discriminate between domestic and foreign entities. It uses the expression “No Person” under Section 4 of the Act. Thus, foreign entities are allowed to operate the payment system in India. To commence a payment system in India, it is necessary to obtain license or approval from the RBI, irrespective of being a domestic or foreign entity. A foreign enti…
Financial Market Infrastructures
- It is a multilateral system among participating institutions including the system operator. This system is used for purposes of clearing, settling, or recording payments, securities, or other financial transactions. FMI refers to Central Securities Depositories (CSDs), Securities Settlement Systems (SSSs), Central Counter Parties (CCPs), and Trade Repositories (TRs) as “payment sy…
Factors and Parameters For Considering The Application
- The factors for considering the application for authorization are provided under Section 7of the Act which states that the following factors should be considered while dealing with the application of authorization for commencing or operating a payment system: 1. The need for the proposed payment system. 2. The technical standards and design of the proposed system. 3. The securit…
Power of RBI
- The Reserve Bank has following powers related to an application for authorization of payment system: 1. According to Sec 7(3) of the Act, RBI can refuse to grant authorization to the application by giving a written notice stating the reasons for refusal of the application also give a reasonable opportunity to the applicant. 2. Section 8 of the Act empowers RBI to revoke the aut…
Settlement of Disputes
- Section 24of the Act prescribes for the system provider to make provisions for the creation of a panel to decide the dispute between the system participants and if any dispute arises between two or more system participants then they shall refer the matter to the panel. If the system participants are not satisfied with the decision of the panel or the dispute arises between any sys…
Offences and Penalties
- Section 26, 27, 28, 29, 30, and 31deals with the provisions related to offences and penalties. Offences under the Act include the unauthorized operation of a payment system, failure to comply with the terms of authorization, failure to produce statements, return information, or documents providing false information, disclosure of prohibited information, violating the provisions of the Ac…