Draft rule for setting up PSO regulator opens for comments

The Reserve Bank of India (RBI) on Tuesday released the draft framework for recognition of a self-regulatory organisation (SRO) for payment system operators. The organisation will be responsible for setting and enforcing rules for payment systems operators (PSOs), the central bank said.

“As the payment ecosystem matures and as the number of payments systems proliferates, it becomes necessary, in the interest of optimal use of regulatory resources, that the payments industry develops industry standards in respect of system security, pricing practices, customer protection measures and grievance redressal mechanisms.

“While self-regulation would release regulatory resources that can be better focused on issues of systemic importance, it would, by virtue of being developed by the industry itself, be more appropriate and encourage better compliance,” the RBI said.

The recognised SRO shall serve as a two-way communication channel between its members and the RBI. It shall work towards establishing minimum benchmarks, standards and help instill professional and healthy market behaviour among its members.

It will have to promptly inform the RBI about any violation that comes to its notice of the provisions of the Payments and Settlement Systems Act or any other regulation issued by the central bank.

The SRO will also establish a uniform grievance redressal and dispute management framework across its members. It shall conduct or promote research and development for creating a secure and safe digital payments ecosystem and investigate any matter referred to by the RBI.

The organisation will be set up as a not-for-profit company under the Companies Act. Any group or association of PSOs that wishes to be recognised as an SRO shall have as its members a majority of the industry segment it seeks to represent.

The RBI will reserve the right to clear the appointment of important positions in the governing body of the SRO. At the time of application, the SRO shall have adequate infrastructure to discharge its duties .

The board of directors and management of the SRO will have to satisfy the fit and proper criteria prescribed by the RBI, on an ongoing basis. Any change in directorship or adverse development about any director will have to be immediately reported to the regulator.

It will also frame a code of conduct to be followed by all its members. “The SRO shall be in a position to exercise surveillance over its members to ensure that the code of conduct prescribed by it and the regulatory prescriptions of the Reserve Bank are adhered to by its members,” the central bank said. The draft framework will be open for public comments till September 15.