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CAIIB Paper 4 BRBL Module B Unit 4 : Payment And Settlement Systems Act, 2007 (New Syllabus)
IIBF has released the New Syllabus Exam Pattern for CAIIB Exam 2023. Following the format of the current exam, CAIIB 2023 will have now four papers. The CAIIB Paper 4 (BANKING REGULATIONS AND BUSINESS LAWS) includes an important topic called “Payment And Settlement Systems Act, 2007”. Every candidate who are appearing for the CAIIB Certification Examination 2023 must understand each unit included in the syllabus.
In this article, we are going to cover all the necessary details of CAIIB Paper 4 (BRBL) Module B (IMPORTANT ACTS/LAWS & LEGAL ASPECTS OF BANKING OPERATIONS – PART A) Unit 4 : Payment And Settlement Systems Act, 2007, Aspirants must go through this article to better understand the topic, Payment And Settlement Systems Act, 2007 and practice using our Online Mock Test Series to strengthen their knowledge of Payment And Settlement Systems Act, 2007. Unit 4 : Payment And Settlement Systems Act, 2007
- The Payment and Settlement Systems Act, 2007 came into effect on August 12, 2008.
- It extends to the whole of India.
- The PSS Act, 2007 provides for the regulation and supervision of payment systems in India and designates the Reserve Bank of India 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.
- RBI is the authority designated under the statute for supervision of payments etc.
- The Reserve Bank shall exercise the powers, perform the functions and discharge the duties conferred on it under this Act through a Board to be known as the “Payments Regulatory Board”.
The Board shall consist of the following members, namely:–
- The Governor of the Reserve Bank-Chairperson, ex officio
- The Deputy Governor of the Reserve Bank in-charge of the Payment and Settlement Systems Member, ex officio
- One officer of the Reserve Bank to be nominated by the Central Board of the Reserve Bank Member, ex officio
- Three persons to be nominated by the Central Government-Members.
- According to Section 4 “(1) No person, other than the Reserve Bank, shall commence or operate a payment system except under and in accordance with an authorization issued by the Reserve Bank under the provisions of this Act.
- The Reserve Bank may, under sub-section (1) of this section, authorize a company or corporation to operate or regulate the existing clearing houses or new clearing houses of banks in order to have a common retail clearing house system for the banks throughout the country: Provided, however, that not less than fifty-one per cent of the equity of such company or corporation shall be held by public sector banks.
Regulation And Supervision By The RBI
Changes in the Payment System/Charges that may be levied
Section 11 states – No system provider shall cause any change in the system which would affect the structure or the operation of the payment system without–
- The prior approval of the Reserve Bank and
- Giving notice of not less than thirty days to the system participants after the approval of the Reserve Bank
- Where the Reserve Bank has any objection, to the proposed change for any reason, RBI shall communicate such objection to the systems provider within two weeks of receipt of the intimation of the proposed changes from the system provider.
- The system provider shall, within a period of two weeks of the receipt of the objections from the Reserve Bank forward his comments to the Reserve Bank and the proposed changes may be effected only after the receipt of approval from the Reserve Bank.
Section 10 A of the Act stipulates that “no bank or system provider shall impose, whether directly or indirectly, any charge upon a person making or receiving a payment by using the electronic modes of payment prescribed under section 269SU of the Income-tax Act, 1961 (43 of 1961).
Power to access information/inspect:
- Section 12/13 and 14 deals with RBI powers to call for returns/access information and carry out inspections of any payment system and the premises from where the system is being operated.
- RBI has also powers to carry out audit and inspections of a payment system or participants (Section 16)
Power to issue directions:
The RBI powers to issue directions is covered in Section 17 to 19 of the Act.
Section 17 states as follows “Where the Reserve Bank is of the opinion that,
(a) a payment system or a system participant is engaging in, or is about to engage in, any act, omission or course of conduct that results in systemic risk being inadequately controlled; or
(b) any action is likely to affect the payment system, the monetary policy or the credit policy of the country, the Reserve Bank may issue directions in writing to such payment system
- To cease and desist from engaging in the act, omission or course of conduct or
- To perform such acts as may be necessary, in the opinion of the Reserve Bank, to remedy the situation.
Settlement And Netting
Settlement can be defined as the process of transferring of funds through a central agency, from payer to payee.
- Gross settlement is where transactions are settled on a one to one basis, i.e. without bunching with other transactions or by not netting receipts and payments between 2 parties.
- Net settlement is where a large number of transactions between counterparties are accumulated and offset against each other, with only the net differential being transferred at predetermined times.
- RBI has powers to stipulate at the time of granting authorization whether the settlement among the system participants shall be determined in accordance with the gross or netting procedure.
Where, by an order of a court, Tribunal or authority––
- A system participant is declared as insolvent or is dissolved or wound up; or
- A liquidator or receiver or assignee is appointed in a proceeding relating to insolvency or dissolution or winding up of a system participant,
Then, notwithstanding anything contained in the Banking Regulation Act, 1949 or the Companies Act, 2013 or the Insolvency and Bankruptcy Code, 2016 or any other law for the time being in force, such order shall not affect any settlement that has become final and irrevocable prior to such order or immediately thereafter, and the right of the system provider to appropriate any collaterals contributed by the system participants towards its settlement.