The Finance Act, passed yesterday in Parliament using a voice vote, will enable the setting up of a Payments Regulatory Board, to regulate payments in the country. The changes essentially amend provisions of the Payment and Settlement Systems Act, 2007, to replace the Board for Regulation and Supervision of Payments and Settlement with the Payments Regulatory Board, for the regulation and supervision of payments and settlement systems. The new board will consist of the Governor of the RBI as its Chairperson, Deputy Governor in charge of Payment and Settlement Systems as member, another officer nominated by the board of the RBI as member, and three nominees of the Central government. The board will define its own processes regarding meetings, venue of meetings and other matters, according to the explanation given in the finance bill. This means that the Payments Regulatory Board will remain under the RBI which isn't neutral The Watal Committee report had pushed for a payments regulator independent of the RBI. It pointed towards heavy-handedness of banks, saying "Fintech companies that require to connect to banking systems to serve their customers tend to face restrictive practices. This anti-competitive setting is not conducive for innovation and consumer interest". The committee pointed towards specific instances where the RBI isn't neutral: a. Payment systems run by RBI are conflicted: The Watal Committee pointed towards payments systems run by the RBI that favor banks: "The most notable distortion in the market, is the case of RTGS, NEFT and NECS, where the RBI…
