Government Considering Separate Regulator For Electronic Payments
With digital transactions gaining traction, the government is considering setting up of a separate regulator to enable electronic payment system in the country as well as regulate transaction charges.
While the Ratan Watal committee on digital payments suggested that the government makes regulation of payments independent from the function of central banking, sources said the Reserve Bank of Indian (RBI) is not very keen on giving up the regulation on payment systems.
The RBI, as a banking regulator, frames policies to benefit banks and not enforcement of competition and innovation objectives in conduct of firms in the payment industry, people familiar with the matter said on the condition of anonymity.
If there is a separate regulator, the focus would be on ease of transaction and rationalisation of cost, the people said, making the case for setting up of an authority for enabling electronic payment system in India.
The RBI, in its representation before the Watal Committee, has stated that regulation of payments should be with the central bank because regulating money supply is an integral function of a central bank and includes maintaining the confidence in money as a means of exchange.
Explaining the need for a separate regulator, the source said that electronic payment does not entail exchange of physical cash and it does not involve deposit taking or credit offtake or servicing of loans/deposits.
The Watal Committee, which submitted its report to Finance Minister Arun Jaitley last month, weighed two options on how best regulation of electronic payments can be made independent from the function of central banking.
The committee considered creation of a new payments regulator, or making the current Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) within RBI more independent.
Sources said that RBI, as a regulator, is focusing more on the interest of banks rather than creation of a financial ecosystem and even after coming up with consultation paper on fixing MDR charges in March 2016, it has not been able to fix the charges.
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