THE PAYMENT AND SETTLEMENT SYSTEMS ACT, 2007
[20th December, 2007]
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 atters connected therewith or incidental thereto.
CHAPTER I
PRELIMINARY
1.(1) This Act may be called the Payment and Settlement Systems Act, 2007
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2) It extends to the whole of India.
(3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions of this Act, and any reference to the commencement in any such provision of this Act shall be construed as a reference to the commencement of that provision.
2. (1) In this Act, unless the context otherwise equires,—
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(
a) “bank” means,—
(i) a bank included in the Second Schedule to the eserve Bank of India Act, 1934;
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ii) a post office savings bank;
(iii) a banking company as defined in clause (c) of ection 5, of the Banking Regulation Act, 1949;
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(iv) a co-operative bank as defined in clause (cci) of section 5, as inserted by section 56, of the Banking egulation Act, 1949; and
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(v) such other bank as the Reserve Bank may, be otification, specify for the purposes of this Act;
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(b) “derivative” means an instrument, to be settled at a future date, whose value is derived from change in interest rate, foreign exchange rate, credit rating or redit index, price of securities (also called
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“underlying”), or any other underlying or a combination of more than one of them and includes interest rate swaps, forward rate agreements, foreign currency swaps, foreign currency rupee swaps, foreign currency options, foreign currency rupee options or any other instrument, as may be specified by the Reserve Bank rom time to time;
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(c) “electronic funds transfer” means any transfer of
Short title, extent and commencement
Definitions
funds which is initiated by a person by way of instruction, authorisation or order to a bank to debit or credit an account maintained with that bank through electronic means and includes point of sale transfers; automated teller machine transactions, direct deposits or withdrawal of funds, transfers initiated by telephone, nternet and, card payment;
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(d) “gross” settlement system means a payment system in which each settlement of funds or securities occurs on the basis of separate or individual nstructions;
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(e) “netting” means the determination by the system provider of the amount of money or securities, due or payable or deliverable, as a result of setting off or adjusting, the payment obligations or delivery obligations among the system participants, including the claims and obligations arising out of the termination by the system provider, on the insolvency or dissolution or winding up of any system participant or such other circumstances as the system provider may specify in its rules or regulations or bye-laws (by whatever name called), of the transactions admitted for settlement at a future date so that only a net claim be demanded or a et obligation be owned;
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(f) “notification” means a notification published in he Official Gazette;
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(g) “payment instruction” means any instrument, authorisation or order in any form, including electronic eans, to effect a payment,
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(i) by a person to a system participant; or
(ii) by a system participant to another system participant;
(h) “payment obligation” means an indebtedness that is owned by one system participant to another system participant as a result of clearing or settlement of one or more payment instructions relating to funds, securities or foreign exchange or derivatives or other ransactions;
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(i) “payment system” means 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;
Explanation.- For the purposes of this clause,
“payment system” includes the systems enabling credit card operations, debit card operations, smart card operations, money transfer operations or similar perations;
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(j) “prescribed” means prescribed by regulations made under this Act;
(k) “regulation” means a regulation made under
this Act;
2 of 1934
18 of 1944
2
of 1934
10 of 1949
(l) “Reserve Bank” means the Reserve Bank of
India, constituted under the Reserve Bank of India Act, 934;
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(m) “securities” means the Government securities as defined in the Public Debt Act, 1944 or such, other securities as may be notified by the Central overnment from time to time under that Act;
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(n) “settlement” means settlement of payment instructions and includes the settlement of securities, foreign exchange or derivatives or other transactions hich involve payment obligations;
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(o) “systemic risk” means the risk arising from—
(i) the inability of a system participant to meet his payment obligations under the payment system as and hen they become due; or
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(ii) any disruption in the system,
which may cause other participants to fail to meet their obligations when due and is likely to have an mpact on the stability of the system:
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Provided that if any doubt or difference arises as to whether a particular risk is likely to have an impact on the stability of the system, the decision of the Reserve ank shall be final;
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(p) “system participant” means a bank or any other person participating in a payment system and ncludes the system provider;
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(q) “system provider” means a person who perates an authorised payment system.
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(2) Words and expressions used, but not defined in this Act and defined in the Reserve Bank of India Act, 1934 or the Banking Regulation Act, 1949, shall have the meanings respectively assigned to them in those Acts.
CHAPTER II
DESIGNATED AUTHORITY AND ITS COMMITTEE
3. (1) The Reserve Bank shall be the designated authority for the regulation and supervision of payment ystems under this Act.
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(2) The Reserve Bank may, for the purposes of exercising the powers and performing the functions and discharging the duties conferred on it by or under this Act, by regulation, constitute a committee of its Central Board to be known as the Board for Regulation
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and Supervision of Payment and Settlement Systems.
(3) The Board constituted under sub-section (2) hall consist of the following members, namely:—
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(a) Governor, Reserve Bank, who shall be the hairperson of the Board;
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(b) Deputy Governors, Reserve Bank, out of whom the Deputy Governor who is in-charge of the Payment and Settlement Systems, shall be the Vice-
Designated authority and its Committee
Chairperson of the Board;
(c) Not exceeding three Directors from the Central
Board of the Reserve Bank of India to be nominated by
the Governor, Reserve Bank.
(4) The powers and functions of the Board
constituted under sub-section (2), the time and venue
of its meetings, the procedure to be followed in such
meetings, (including the quorum at such meetings) and
other matters incidental thereto shall be such as may
be prescribed.
(5) The Board for Regulation and Supervision of
2 of 1934
Payment and Settlement Systems constituted under
clause (i) of sub-section (2) of section 58 of the
Reserve Bank of India Act, 1934 (2 of 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
made under the Reserve Bank of India Act, 1934 in so
far as they are not inconsistent with the provisions of
this Act.
CHAPTER III
AUTHORISATION OF PAYMENT SYSTEMS
Payment
4. (1) No person, other than the Reserve Bank,
system not
shall commence or operate a payment system except
to operate
under and in accordance with an authorisation issued
without
by the Reserve Bank under the provisions of this Act:
authorisation
Provided that nothing contained in this section
shall apply to—
(a) the continued operation of an existing payment
system on commencement of this Act for a period not
exceeding six months from such commencement,
unless within such period, the operator of such
payment system obtains an authorisation under this
Act or the application for authorisation made under
section 7 of this Act is refused by the Reserve Bank;
(b) any person acting as the duly appointed agent
of another person to whom the payment is due;
(c) a company accepting payments either from its
holding company or any of its subsidiary companies or
from any other company which is also a subsidiary of
the same holding company;
(d) any other person whom the Reserve Bank
may, after considering the interests of monetary policy
or efficient operation of payment systems, the size of
any payment system or for any other reason, by
notification, exempt from the provisions of this section.
(2) The Reserve Bank may, under sub-section (1)
of this section, authorise 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.
Explanation.- For the purposes of this clause,
“public sector banks” shall include a “corresponding
new bank”, “State Bank of India" and “subsidiary bank”
as defined in section 5 of the Banking Regulation Act,
10 of 1949
1949.
5. (1) Any person desirous of commencing or
carrying on a payment system may apply to the
Reserve Bank for an authorisation under this Act.
(2) An application under sub-section (1) shall be
made in such form and in such manner and shall be
accompanied by such fees as may be prescribed.
6. After the receipt of an application under section
5, and before an authorisation is issued under this Act,
the Reserve Bank may make such inquiries as it may
consider necessary for the purpose of satisfying itself
about the genuineness of the particulars furnished by
the applicant, his capacity to operate the payment
system, the credentials of the participants or for any
other reason and when such an inquiry is conducted by
any person authorised by it in this behalf, it may require
a report from such person in respect of the inquiry.
7. (1) The Reserve Bank may, if satisfied, after
any inquiry under section 6 or otherwise, that the
application is complete in all respects and that it
conforms to the provisions of this Act and the
regulations issue an authorisation for operating the
payment system under this Act having regard to the
following considerations, namely:—
(i) the need for the proposed payment system or
the services proposed to be undertaken by it;
(ii) the technical standards or the design of the
proposed payment system;
(iii) the terms and conditions of operation of the
proposed payment system including any security
procedure;
(iv) the manner in which transfer of funds may be
effected within the payment system;
(v) the procedure for netting of payment
instructions effecting the payment obligations under the
payment system;
(vi) the financial status, experience of
management and integrity of the applicant;
(vii) interests of consumers, including the terms
and conditions governing their relationship with
payment system providers;
(viii) monetary and credit policies; and
Application for authorisation
Inquiry by the Reserve Bank
Issue or refusal of authorisation
(ix) such other factors as may be considered
relevant by the Reserve Bank.
(2) An authorisation issued under sub-section (1) shall
be in such form as may be prescribed and shall—
(a) state the date on which it takes effect;
(b) state the conditions subject to which the
authorisation shall be in force;
(c) indicate the payment of fees, if any, to be paid for
the authorisation to be in force;
(d) if it considers necessary, require the applicant to
furnish such security for the proper conduct of the
payment system under the provisions of this Act;
(e) continue to be in force till the authorisation is
revoked.
(3) Where the Reserve Bank considers that the
application for authorisation should be refused, it shall
give the applicant a written notice to that effect stating
the reasons for the refusal:
Provided that no such application shall be refused
unless the applicant is given a reasonable opportunity
of being heard.
(4) Every application for authorisation shall be
processed by the Reserve Bank as soon as possible
and an endeavour shall be made to dispose of such
application within six months from the date of filing of
such application.
Revocation
8. (1) If a system provider,—
of
(i) contravenes any provisions of this Act, or
authorisation
(ii) does not comply with the regulations, or
(iii) fails to comply with the orders or directions issued
by the designated authority, or
(iv) operates the payment system contrary to the
conditions subject to which the authorisation was
issued,
the Reserve Bank may, by order, revoke the
authorisation given to such system provider under this
Act:
Provided that no order of revocation under sub-section
(1) shall be made -
(i) except after giving the system provider a reasonable
opportunity of being heard; and
(ii) without prejudice to the direction of the Reserve
Bank to the system provider that the operation of the
payment system shall not be carried out till the order of
revocation is issued.
(2) Nothing contained in sub-section (1) shall apply to a
case where the Reserve Bank considers it necessary
to revoke the authorisation given to a payment system
in the interest of the monetary policy of the country or
for any other reasons to be specified by it in the order.
(3) The order of revocation issued under sub-section
(1) shall include necessary provisions to protect and
safeguard the interests of persons affected by such
order of revocation.
(4) Where a system provider becomes insolvent or
dissolved or wound up, such system provider shall
inform, that fact to the Reserve Bank and thereupon
the Reserve Bank shall take such steps as deemed
necessary to revoke the authorisation issued to such
system provider to operate the payment system.
9. (1) Any applicant for an authorisation whose
Appeal to the
application for the operation of the payment system is
Central
refused under sub-section (3) of section 7 or a system
Government
provider who is aggrieved by an order of revocation
under section 8 may, within thirty days from the date on
which the order is communicated to him, appeal to the
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entral Government.
(2) The Central Government shall endeavour to dispose of an appeal under sub-section (1) within a eriod of three months.
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(3) The decision of the Central Government on the appeal under sub-section (1) shall be final.
CHAPTER IV
REGULATION AND SUPERVISION BY THE RESERVE
BANK
10. (1) The Reserve Bank may, from time to time,
Power to
prescribe—
determine
(a) the format of payment instructions and the size and
standards
shape of such instructions;
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b) the timings to be maintained by payment systems;
(c) the manner of transfer of funds within the payment system, either through paper, electronic means or in any other manner, between banks or between banks nd other system participants;
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(d) such other standards to be complied with the ayment systems generally;
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(e) the criteria for membership of payment systems including continuation, termination and rejection of embership;
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(f) the conditions subject to which the system participants shall participate in such fund transfers and the rights and obligations of the system participants in uch funds.
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(2) Without prejudice to the provisions of sub-section (1), the Reserve Bank may, from time to time, issue such guidelines, as it may consider necessary for the roper and efficient management of the payment
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systems generally or with reference to any particular
payment system.
Notice of
11. (1) No system provider shall cause any change in
change in the
the system which would affect the structure or the
payment
operation of the payment system without—
system
(a) the prior approval of the Reserve Bank; and
Power to call for returns, documents or other information
Access to information
Power to enter and inspect
Information, etc., to be confidential
(b) giving notice of not less than thirty days to the system participants after the approval of the Reserve ank:
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Provided that in the interest of monetary policy of the country or in public interest, the Reserve Bank may permit the system provider to make any changes in a payment system without giving notice to the system participants under clause (b) or requiring the system provider to give notice for a period longer than thirty ays.
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(2) Where the Reserve Bank has any objection, to the proposed change for any reason, it shall communicate such objection to the systems provider within two weeks of receipt of the intimation of the proposed hanges from the system provider.
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(3) 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
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eceipt of approval from the Reserve Bank.
12. The Reserve Bank may call for from any system provider such returns or documents as it may require or other information in regard to the operation of his payment system at such intervals, in such form and in such manner, as the Reserve Bank may require from time to time or as may be prescribed and such order hall be complied with.
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3. The Reserve Bank shall have right to access any
information relating to the operation of any payment system and system provider and all the system participants shall provide access to such information to he Reserve Bank.
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14. Any officer of the Reserve Bank duly authorised by it in writing in this behalf, may for ensuring compliance with the provisions of this Act or any regulations, enter any premises where a payment system is being operated and may inspect any equipment, including any computer system or other documents situated at such premises and call upon any employee of such system provider or participant thereof or any other person working in such premises to furnish such information or documents as may be required by such fficer.
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5. (1) Subject to the provisions of sub-section (2), any
document or information obtained by the Reserve Bank under sections 12 to 14 (both inclusive) shall be kept onfidential.
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(2) Notwithstanding anything contained in sub-section (1), the Reserve Bank may disclose any document or information obtained by it under sections 12 to 14 (both inclusive) to any person to whom the disclosure of such document or information is considered necessary for
protecting the integrity, effectiveness or security of the payment system, or in the interest of banking or monetary policy or the operation of the payment ystems generally or in the public interest.
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16. The Reserve Bank may, for the purpose of carrying out its functions under this Act, conduct or get conducted audits and inspections of a payment system or participants thereof and it shall be the duty of the system provider and the system participants to assist the Reserve Bank to carry out such audit or inspection, s the case may be.
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7. 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, or is likely to result, in ystemic risk being inadequately controlled or
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(b) any action under clause (a) is likely to affect the payment system, the monetary policy or the credit olicy of the country,
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the Reserve Bank may issue directions in writing to such payment system or system participant requiring it, ithin such time as the Reserve Bank may specify –
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(i) to cease and desist from engaging in the act, omission or course of conduct or to ensure the system participants to cease and desist from the act, omission r course of conduct; or
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(ii) to perform such acts as may be necessary, in the opinion of the Reserve Bank, to remedy the situation. 8. Without prejudice to the provisions of the foregoing,
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the Reserve Bank may, if it is satisfied that for the purpose of enabling it to regulate the payment systems or in the interest of management or operation of any of the payment systems or in public interest, it is necessary so to do, lay down policies relating to the regulation of payment systems including electronic, non-electronic, domestic and international payment systems affecting domestic transactions and give such directions in writing as it may consider necessary to system providers or the system participants or any other person either generally or to any such agency and in particular, pertaining to the conduct of business elating to payment systems.
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19. Every person to whom a direction has been issued by the Reserve Bank under this Act shall comply with such direction without any delay and a report of compliance shall be furnished to the Reserve Bank within the time allowed by it.
CHAPTER V
RIGHTS AND DUTIES OF A SYSTEM PROVIDER 20. Every system provider shall operate the payment system in accordance with the provisions of this Act, the regulations, the contract governing the relationship
Power to carry out audit and inspection
Power to issue directions
Power of Reserve Bank to give directions generally
Directions of Reserve Bank to be complied with
System provider to act in accordance with the Act,
Duties of a system provider
Duty to keep documents in the payment system confidential
Settlement and netting
among the system participants, the rules and regulations, etc regulations hich deal with the operation of the
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payment system and the conditions subject to which the authorisation is issued, and the directions given by he Reserve Bank from time to time.
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21. (1) Every system provider shall disclose to the existing or potential system participants, the terms and conditions including the charges and the limitations of liability under the payment system, supply them with copies of the rules and regulations governing the operation of the payment system, netting arrangements nd other relevant documents.
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(2) It shall be the duty of every system provider to maintain the standards determined under this Act
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2. (1)A system provider shall not disclose to any other
person the existence or contents of any document or part thereof or other information given to him by a system participant, except where such disclosure is required under the provisions of this Act or the disclosure is made with the express or implied consent of the system participant concerned or where such disclosure is in obedience to the orders passed by a court of competent jurisdiction or a statutory authority n exercise of the powers conferred by a statute.
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(
2) The provisions of the Bankers’ Book Evidence Act,
1891 shall apply in relation to the information or 18 of 1991 documents, or other books in whatever form
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aintained by the system provider.
23. (1) The payment obligations and settlement instructions among the system participants shall be determined in accordance with the gross or netting procedure, as the case may be, approved by the Reserve Bank while issuing authorisation to a payment ystem.
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(2) Where the rules providing for the operation of a payment system indicates a procedure for the distribution of losses between the system participants and the payment system, such procedure shall have effect notwithstanding anything to the contrary ontained in any other law for the time being in force.
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(3) A settlement effected under such procedure shall e final and irrevocable.
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(4) Where a system participant is declared by a court of competent jurisdiction as insolvent or is dissolved or ound up, then notwithstanding anything contained in
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the Companies Act, 1956 or the Banking Regulation
1 of 1956
Act, 1949 or any other law for the time being in force,
10 of 1949
the order of adjudication or dissolution or winding up,
as the case may be, shall not affect any settlement that
has become final and irrevocable and the right of the
system provider to appropriate any collaterals
contributed by the system participant towards its
settlement or other obligations in accordance with the ules, regulations or bye-laws of such system provider.
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Explanation.- For the removal of doubts, it is hereby declared that the settlement, whether gross or net, referred to in this section is final and irrevocable as soon as the money, securities, foreign exchange or derivatives or other transactions payable as a result of such settlement is determined, whether or not such money, securities or foreign exchange or derivatives or other transactions is actually paid.
CHAPTER VI
SETTLEMENT OF DISPUTES
24. (1) The system provider shall make provision in its rules or regulations for creation of panel consisting of not less than three system participants other than the system participants who are parties to the dispute to decide the disputes between system participants in respect of any matter connected with the operation of he payment system.
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(2) Where any dispute in respect of any matter connected with the operation of the payment system arises between two- or more system participants, the system provider shall refer the dispute to the panel eferred to in sub-section (1).
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(3) Where any dispute arises between any system participant and the system provider or between system providers or where any of the system participants is not satisfied with the decision of the panel referred to in sub-section (1), the dispute shall be referred to the eserve Bank.
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(4) The dispute referred to the Reserve Bank for adjudication under sub-section (3) shall be disposed of by an officer of the Reserve Bank generally or specially authorised in this behalf and the decision of the eserve Bank shall be final and binding.
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(5) Where a dispute arises between the Reserve Bank, while acting in its capacity as system provider or as system participant, and another system provider or system participant, the matter shall be referred to the Central Government which may authorise an officer not below the rank of Joint Secretary for settlement of the ispute and the decision of such officer shall be final.
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5. (1) Where an electronic funds transfer initiated by a
person from an account maintained by him cannot be executed on the ground that the amount of money standing to the credit of that account is insufficient to honour the transfer instruction or that it exceeds the amount arranged to be paid from that account by an agreement made with a bank, such person shall be deemed to have committed an offence and shall,
Settlement of disputes
Dishonour of electronic funds transfer for insufficiency, etc., of funds in the account
without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the electronic funds transfer, or ith both:
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Provided that nothing contained in this section shall pply unless—
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(a) the electronic funds transfer was initiated for payment of any amount of money to another person for the discharge, in whole or in part, of any debt or other iability;
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(b) the electronic funds transfer was initiated in accordance with the relevant procedural guidelines ssued by the system provider;
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(c) the beneficiary makes a demand for the payment of the said amount of money by giving a notice in writing to the person initiating the electronic funds transfer within thirty days of the receipt of information by him from the bank concerned regarding the dishonour of he electronic funds transfer; and
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(d) the person initiating the electronic funds transfer fails to make the payment of the said money to the beneficiary within fifteen days of the receipt of the said otice.
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(2) It shall be presumed, unless the contrary is proved, that the electronic funds transfer was initiated for the discharge, in whole or in part, of any debt or other iability.
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(3) It shall not be a defence in a prosecution for an offence under sub-section (1) that the person, who initiated the electronic funds transfer through an instruction, authorisation, order or agreement, did not have reason to believe at the time of such instruction, authorisation, order or agreement that the credit of his account is insufficient to effect the electronic funds ransfer.
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(4) The Court shall, in respect of every proceeding under this section, on production of a communication from the bank denoting the dishonour of electronic funds transfer, presume the fact of dishonour of such electronic funds transfer, unless and until such fact is
disproved.
(5) The provisions of Chapter XVII of the Negotiable
26 of 1881
Instruments Act, 1881 shall apply to the dishonour of
electronic funds transfer to the extent the
circumstances admit.
Explanation — For the purposes of this section, “debt
or other liability” means a legally enforceable debt or
other liability, as the case may be.
CHAPTER VII
OFFENCES AND PENALTIES
26. (1) Where a person contravenes the provisions of
Penalties
section 4 or fails to comply with the terms and
conditions subject to which the authorisation has been
issued under section 7, he shall be punishable with
imprisonment for a term which shall not be less than
one month but which may extend to ten years or with
fine which may extend to one crore rupees or with both
and with a further fine which may extend to one lakh
rupees for every day, after the first during which the
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ontravention or failure to comply continues.
(2) Whoever in any application for authorisation or in any return or other document or on any information required to be furnished by or under, or for the purpose of, any provision of this Act, wilfully makes a statement which is false in any material particular, knowing it to be false or wilfully omits to make a material statement, shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine which shall not be less than ten lakh rupees and hich may extend to fifty Iakh rupees.
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(3) If any person fails to produce any statement, information, returns or other documents, or to furnish any statement, information, returns or other documents, which under section 12 or under section 13, it is his duty to furnish or to answer any question relating to the operation of a payment system which is required by an officer making inspection under section 14, he shall be punishable with fine which may extend to ten Iakh rupees in respect of each offence and if he persists in such refusal, to a further fine which may extend to twenty-five thousand rupees for every day for hich the offence continues.
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(4) If any person discloses any information, the disclosure of which is prohibited under section 22, he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five lakh rupees or an amount equal to twice the amount of the damages incurred by the act of such isclosure, whichever is higher or with both.
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(5) Where a direction issued under this Act is not complied with within the period stipulated by the Reserve Bank or where no such period is stipulated, within a reasonable time or where the penalty imposed by the Reserve Bank under section 30 is not paid within a period of thirty days from the date of the order, the system provider or the system participant which has failed to comply with the direction or to pay the penalty shall be punishable with imprisonment for a term which shall not be less than one month but which
Offences by companies
Cognizance of offences
may extend to ten years, or with fine which may extend to one crore rupees or with both and where the failure to comply with the direction continues, with further fine which may extend to one lakh rupees for every day, fter the first during which the contravention continues.
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(6) If any provision of this Act is contravened, or if any default is made in complying with any other requirement of this Act, or of any regulation, order or direction made or given or condition imposed thereunder and in respect of which no penalty has been specified, then, the person guilty of such contravention or default, as the case may be, shall be punishable with fine which may extend to ten lakh rupees and where a contravention or default is a continuing one, with a further fine which may extend to twenty-five thousand rupees for every day, after the first during which the contravention or default ontinues.
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27. (1) Where a person committing a contravention of any of the provisions of this Act or any regulation, direction or order made there under is a company, every person who, at the time of the contravention, was in-charge of, and was responsible to, the company for the conduct of business of the company, as well as the company, shall be guilty of the contravention and shall be liable to be proceeded against and punished ccordingly:
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Provided that nothing contained in this sub-section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to revent such contravention.
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(2) Notwithstanding anything contained in sub-section (1), where a contravention of any of the provisions of this Act or of any regulation, direction or order made thereunder has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished ccordingly.
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xplanation.- For the purposes of this section,—
(a) “company” means anybody corporate and includes a firm or other association of individuals; and
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b) "director", in relation to a firm, means a partner in
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he firm.
28.: (1) No court shall take cognizance of an offence punishable under this Act except upon a complaint in writing made by an officer of the Reserve Bank
generally or specially authorised by it in writing in this behalf, and no court, lower than that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any such offence:
Provided that the Court may take cognizance of an offence punishable under section 25 upon a complaint in writing made by the person aggrieved by the dishonour of the electronic funds transfer.
(2) Notwithstanding anything contained in the Code of 2 of 1974 Criminal Procedure, 1973, a Magistrate may dispense with the personal attendance of the officer of the Reserve Bank filing the complaint, but the Magistrate may, in his discretion, at any stage of the proceedings,
direct the personal attendance of the complainant.
29. A court imposing any fine under this Act may direct that the whole or any part thereof shall be applied in, or towards payment of, the costs of the proceedings.
30. (1) Notwithstanding anything contained in section
26, if a contravention or default of the nature referred to in sub-section (2) or sub-section (6) of section 26, as the case may be, the Reserve Bank may impose on the person contravening or committing default a penalty not exceeding five lakh rupees or twice the amount involved in such contravention or default where such amount is quantifiable, whichever is more, and where such contravention of default is a continuing one, a further penalty which may extend to twenty-five thousand rupees for every day after the first during which the contravention or default continues.
(2) For the purpose of imposing penalty under sub-section (1), the Reserve Bank shall serve a notice on the defaulter requiring him to show cause why the amount specified in the notice should not be imposed as a penalty and a reasonable opportunity of being heard shall also be given to such defaulter.
(3) Any penalty imposed by the Reserve Bank under this section shall be payable within a period of thirty days from the date on which notice issued by the Reserve Bank demanding payment of the sum is served on the defaulter and, in the event of failure of the person to pay the sum within such period, may be recovered on a direction made by the principal civil court having jurisdiction in the area where the registered office of the defaulter company or the official business of the person is situated:
Provided that no such direction shall be made except on an application made by an officer of the Reserve Bank authorised by it in this behalf.
(4) The Reserve Bank may recover the amount of penalty by debiting the current account, if any, of the defaulter or by liquidating the securities held to the credit of the defaulter or in accordance with the
Application of fine
Power of Reserve Bank to impose fines
Power to compound offences
Act to have overriding effect
Mode of recovery of penalty
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rovisions of this Act.
(5) The court which makes a direction under sub-section (3) shall issue a certificate specifying the sum payable by the defaulter and every such certificate shall be enforceable in the same manner as it were a ecree made by the court in a civil suit.
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(6) Where any complaint has been filed against any person in any court in respect of the contravention or default of the nature referred to in sub-section (2), or, as the case may be, sub-section (4) of section 26, then, no proceeding for the imposition of any penalty n the person shall be taken under this section.
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31. (1) Notwithstanding anything contained in the Code
of Criminal Procedure, 1973, any offence punishable 2 of 1974 under his Act for any contravention, not being an
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offence punishable with imprisonment only, or with imprisonment and also with fine, may, on receipt of an application from the person committing such contravention either before or after the institution of any proceeding, be compounded by an officer of the eserve Bank duly authorised by it in this behalf.
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(2) Where a contravention has been compounded under sub-section (1) no proceeding or further proceeding, as the case may be, shall be initiated or continued, as the case may be, against the person committing such contravention under that section, in respect of the contravention so compounded.
CHAPTER VIII
MISCELLANEOUS
32. The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.
33. (1) The penalty imposed on the defaulter by the Reserve Bank under section 30 may be recovered by issuing a notice to any person from whom any amount is due to the defaulter, by requiring such person to deduct from the amount payable by him to the defaulter, the amount payable to the Reserve Bank by ay of penalty and pay to the Reserve Bank.
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(2) Save as otherwise provided in this section, every person to whom a notice is issued under this sub-section shall be bound to comply with such notice, and, in particular, where such notice is issued to a post office, bank or an insurer, it shall not be necessary for any passbook, ‘deposit receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like being made before payment is made notwithstanding that any rule, practice or equirement to the contrary.
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(3) Any claim respecting any property in relation to which a notice under this sub-section has been issued
arising after the date of the notice shall be void as
against any demand contained in the notice. (4) Where a person to whom the notice under this sub-
section is sent objects to it by a statement on oath that the sum demanded or any part thereof is not due to the
defaulter or that he does not hold any money for or on account of the defaulter, then, nothing contained in this
sub-section shall be deemed to require such person to
pay any such sum or part thereof, as the case may be,
but if it is discovered that such statement was false in any material particular, such person shall be personally
liable to the Reserve Bank to the extent of his own
liability to the defaulter on the date of the notice, or to
the extent of the penalty imposed on the defaulter by
the Reserve Bank, whichever is less.
(5) The Reserve Bank may at any time or from time to
time, amend or revoke any notice issued under this
section or extend the time for making the payment in
pursuance of such notice;
(6) The Reserve Bank shall grant a receipt for any
amount paid to it in compliance with a notice, issued
under this section and the person so paying shall be
fully discharged from his liability to the defaulter to the
extent of the amount so paid.
(7) Any person discharging any liability to the defaulter
after the receipt of a notice under this section shall be
personally liable to the Reserve Bank to the extent of
his own liability to the defaulter so discharged or to the
extent of the penalty imposed on the defaulter by the
Reserve Bank, whichever is less.
(8) If the person to whom the notice under this section
is sent fails to make payment in pursuance thereof to
the Reserve Bank, he shall be deemed to be the
defaulter in respect of the amount specified in the
notice and further proceedings may be taken against
him for the realisation of the amount as if it were an
arrear due from him in the manner provided in this
section.
Explanation.- For the purposes of this section,
“defaulter” means any person or system provider or system participant on whom the Reserve Bank has
imposed a penalty under section 30.
34. Nothing contained in this Act shall apply to stock
exchanges or the clearing corporations of the stock
exchanges.
35. (1) Every officer of the Reserve Bank who has
been entrusted with any power under this Act, shall be
deemed to be a public servant within the meaning of
45 of 1860
section 21 of the Indian Penal Code.
Act not to apply to stock ex-changes or clearing corporations of stock exchange
Certain persons deemed to be public servants
Power to remove difficulties
Power of Reserve Bank to make regulations
36. No suit or other legal proceedings shall lie against the Central Government, the Reserve Bank, or any officer thereof for any damage caused or likely to be caused by anything which is in good faith done or intended to be done in pursuance of this Act, any regulations, order or direction made or given hereunder.
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7. (1) If any difficulty arises in giving effect to the
provisions of this Act, the Central Government may, by order published in the Official Gazette, make such provision is not inconsistent with the provisions of this Act as appear to it to be necessary or expedient for emoving the difficulty:
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Provided that no order shall be made under this section after the expiry of a period of two years from the ommencement of this Act.
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(2) Every order made under this section shall be laid, as soon as may be after it is made, before each House f Parliament.
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38. (1) The Reserve Bank may, by notification, make regulations consistent with this Act to carry out the rovisions of this Act.
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(2) In particular, and without prejudice to the generality of the foregoing provision, such regulations may provide for all or any of the following matters, amely:—
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(a) the powers and Functions of the Committee constituted under sub-section (2), the time and venue of its meetings and the procedure to be followed by it at its meetings (including the quorum at such meetings) nder sub-section (4) of section 3;
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(b) the form and manner in which an application for authorisation for commencing or carrying on a payment system shall be made and the fees which shall accompany such application under sub-section (2) of ection 5;
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(c) the form in which an authorisation to operate a payment system under this Act shall be issued under ub-section (2) of section 7;
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(d) the format of payment instructions and other matters relating to determination of standards to be complied with by the payment systems under sub-ection (1) of section 10;
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(e) the intervals, at which and the form and manner in which the information or returns required by the eserve Bank shall be furnished under section 12;
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(f) such other matters as are required to be, or may be, rescribed.
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(2) Any regulation made under this section shall have effect from such earlier or later date (nor earlier than the date of commencement of this Act) as may be specified in the regulation.
Protection of action taken in good faith
(3) Every regulation shall, as soon as may be after it is made by the Reserve Bank, be forwarded to the Central Government and that Central Government shall cause a copy of the same to be laid before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the regulation, or both Houses agree that the regulation should not be made, the regulation shall, thereafter, have effect only in such modified form or be of no effect, as the case may be; so however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that regulation.
[20th December, 2007]
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 atters connected therewith or incidental thereto.
CHAPTER I
PRELIMINARY
1.(1) This Act may be called the Payment and Settlement Systems Act, 2007
(
2) It extends to the whole of India.
(3) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions of this Act, and any reference to the commencement in any such provision of this Act shall be construed as a reference to the commencement of that provision.
2. (1) In this Act, unless the context otherwise equires,—
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(
a) “bank” means,—
(i) a bank included in the Second Schedule to the eserve Bank of India Act, 1934;
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(
ii) a post office savings bank;
(iii) a banking company as defined in clause (c) of ection 5, of the Banking Regulation Act, 1949;
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(iv) a co-operative bank as defined in clause (cci) of section 5, as inserted by section 56, of the Banking egulation Act, 1949; and
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(v) such other bank as the Reserve Bank may, be otification, specify for the purposes of this Act;
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(b) “derivative” means an instrument, to be settled at a future date, whose value is derived from change in interest rate, foreign exchange rate, credit rating or redit index, price of securities (also called
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“underlying”), or any other underlying or a combination of more than one of them and includes interest rate swaps, forward rate agreements, foreign currency swaps, foreign currency rupee swaps, foreign currency options, foreign currency rupee options or any other instrument, as may be specified by the Reserve Bank rom time to time;
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(c) “electronic funds transfer” means any transfer of
Short title, extent and commencement
Definitions
funds which is initiated by a person by way of instruction, authorisation or order to a bank to debit or credit an account maintained with that bank through electronic means and includes point of sale transfers; automated teller machine transactions, direct deposits or withdrawal of funds, transfers initiated by telephone, nternet and, card payment;
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(d) “gross” settlement system means a payment system in which each settlement of funds or securities occurs on the basis of separate or individual nstructions;
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(e) “netting” means the determination by the system provider of the amount of money or securities, due or payable or deliverable, as a result of setting off or adjusting, the payment obligations or delivery obligations among the system participants, including the claims and obligations arising out of the termination by the system provider, on the insolvency or dissolution or winding up of any system participant or such other circumstances as the system provider may specify in its rules or regulations or bye-laws (by whatever name called), of the transactions admitted for settlement at a future date so that only a net claim be demanded or a et obligation be owned;
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(f) “notification” means a notification published in he Official Gazette;
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(g) “payment instruction” means any instrument, authorisation or order in any form, including electronic eans, to effect a payment,
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(i) by a person to a system participant; or
(ii) by a system participant to another system participant;
(h) “payment obligation” means an indebtedness that is owned by one system participant to another system participant as a result of clearing or settlement of one or more payment instructions relating to funds, securities or foreign exchange or derivatives or other ransactions;
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(i) “payment system” means 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;
Explanation.- For the purposes of this clause,
“payment system” includes the systems enabling credit card operations, debit card operations, smart card operations, money transfer operations or similar perations;
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(j) “prescribed” means prescribed by regulations made under this Act;
(k) “regulation” means a regulation made under
this Act;
2 of 1934
18 of 1944
2
of 1934
10 of 1949
(l) “Reserve Bank” means the Reserve Bank of
India, constituted under the Reserve Bank of India Act, 934;
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(m) “securities” means the Government securities as defined in the Public Debt Act, 1944 or such, other securities as may be notified by the Central overnment from time to time under that Act;
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(n) “settlement” means settlement of payment instructions and includes the settlement of securities, foreign exchange or derivatives or other transactions hich involve payment obligations;
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(o) “systemic risk” means the risk arising from—
(i) the inability of a system participant to meet his payment obligations under the payment system as and hen they become due; or
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(ii) any disruption in the system,
which may cause other participants to fail to meet their obligations when due and is likely to have an mpact on the stability of the system:
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Provided that if any doubt or difference arises as to whether a particular risk is likely to have an impact on the stability of the system, the decision of the Reserve ank shall be final;
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(p) “system participant” means a bank or any other person participating in a payment system and ncludes the system provider;
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(q) “system provider” means a person who perates an authorised payment system.
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(2) Words and expressions used, but not defined in this Act and defined in the Reserve Bank of India Act, 1934 or the Banking Regulation Act, 1949, shall have the meanings respectively assigned to them in those Acts.
CHAPTER II
DESIGNATED AUTHORITY AND ITS COMMITTEE
3. (1) The Reserve Bank shall be the designated authority for the regulation and supervision of payment ystems under this Act.
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(2) The Reserve Bank may, for the purposes of exercising the powers and performing the functions and discharging the duties conferred on it by or under this Act, by regulation, constitute a committee of its Central Board to be known as the Board for Regulation
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and Supervision of Payment and Settlement Systems.
(3) The Board constituted under sub-section (2) hall consist of the following members, namely:—
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(a) Governor, Reserve Bank, who shall be the hairperson of the Board;
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(b) Deputy Governors, Reserve Bank, out of whom the Deputy Governor who is in-charge of the Payment and Settlement Systems, shall be the Vice-
Designated authority and its Committee
Chairperson of the Board;
(c) Not exceeding three Directors from the Central
Board of the Reserve Bank of India to be nominated by
the Governor, Reserve Bank.
(4) The powers and functions of the Board
constituted under sub-section (2), the time and venue
of its meetings, the procedure to be followed in such
meetings, (including the quorum at such meetings) and
other matters incidental thereto shall be such as may
be prescribed.
(5) The Board for Regulation and Supervision of
2 of 1934
Payment and Settlement Systems constituted under
clause (i) of sub-section (2) of section 58 of the
Reserve Bank of India Act, 1934 (2 of 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
made under the Reserve Bank of India Act, 1934 in so
far as they are not inconsistent with the provisions of
this Act.
CHAPTER III
AUTHORISATION OF PAYMENT SYSTEMS
Payment
4. (1) No person, other than the Reserve Bank,
system not
shall commence or operate a payment system except
to operate
under and in accordance with an authorisation issued
without
by the Reserve Bank under the provisions of this Act:
authorisation
Provided that nothing contained in this section
shall apply to—
(a) the continued operation of an existing payment
system on commencement of this Act for a period not
exceeding six months from such commencement,
unless within such period, the operator of such
payment system obtains an authorisation under this
Act or the application for authorisation made under
section 7 of this Act is refused by the Reserve Bank;
(b) any person acting as the duly appointed agent
of another person to whom the payment is due;
(c) a company accepting payments either from its
holding company or any of its subsidiary companies or
from any other company which is also a subsidiary of
the same holding company;
(d) any other person whom the Reserve Bank
may, after considering the interests of monetary policy
or efficient operation of payment systems, the size of
any payment system or for any other reason, by
notification, exempt from the provisions of this section.
(2) The Reserve Bank may, under sub-section (1)
of this section, authorise 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.
Explanation.- For the purposes of this clause,
“public sector banks” shall include a “corresponding
new bank”, “State Bank of India" and “subsidiary bank”
as defined in section 5 of the Banking Regulation Act,
10 of 1949
1949.
5. (1) Any person desirous of commencing or
carrying on a payment system may apply to the
Reserve Bank for an authorisation under this Act.
(2) An application under sub-section (1) shall be
made in such form and in such manner and shall be
accompanied by such fees as may be prescribed.
6. After the receipt of an application under section
5, and before an authorisation is issued under this Act,
the Reserve Bank may make such inquiries as it may
consider necessary for the purpose of satisfying itself
about the genuineness of the particulars furnished by
the applicant, his capacity to operate the payment
system, the credentials of the participants or for any
other reason and when such an inquiry is conducted by
any person authorised by it in this behalf, it may require
a report from such person in respect of the inquiry.
7. (1) The Reserve Bank may, if satisfied, after
any inquiry under section 6 or otherwise, that the
application is complete in all respects and that it
conforms to the provisions of this Act and the
regulations issue an authorisation for operating the
payment system under this Act having regard to the
following considerations, namely:—
(i) the need for the proposed payment system or
the services proposed to be undertaken by it;
(ii) the technical standards or the design of the
proposed payment system;
(iii) the terms and conditions of operation of the
proposed payment system including any security
procedure;
(iv) the manner in which transfer of funds may be
effected within the payment system;
(v) the procedure for netting of payment
instructions effecting the payment obligations under the
payment system;
(vi) the financial status, experience of
management and integrity of the applicant;
(vii) interests of consumers, including the terms
and conditions governing their relationship with
payment system providers;
(viii) monetary and credit policies; and
Application for authorisation
Inquiry by the Reserve Bank
Issue or refusal of authorisation
(ix) such other factors as may be considered
relevant by the Reserve Bank.
(2) An authorisation issued under sub-section (1) shall
be in such form as may be prescribed and shall—
(a) state the date on which it takes effect;
(b) state the conditions subject to which the
authorisation shall be in force;
(c) indicate the payment of fees, if any, to be paid for
the authorisation to be in force;
(d) if it considers necessary, require the applicant to
furnish such security for the proper conduct of the
payment system under the provisions of this Act;
(e) continue to be in force till the authorisation is
revoked.
(3) Where the Reserve Bank considers that the
application for authorisation should be refused, it shall
give the applicant a written notice to that effect stating
the reasons for the refusal:
Provided that no such application shall be refused
unless the applicant is given a reasonable opportunity
of being heard.
(4) Every application for authorisation shall be
processed by the Reserve Bank as soon as possible
and an endeavour shall be made to dispose of such
application within six months from the date of filing of
such application.
Revocation
8. (1) If a system provider,—
of
(i) contravenes any provisions of this Act, or
authorisation
(ii) does not comply with the regulations, or
(iii) fails to comply with the orders or directions issued
by the designated authority, or
(iv) operates the payment system contrary to the
conditions subject to which the authorisation was
issued,
the Reserve Bank may, by order, revoke the
authorisation given to such system provider under this
Act:
Provided that no order of revocation under sub-section
(1) shall be made -
(i) except after giving the system provider a reasonable
opportunity of being heard; and
(ii) without prejudice to the direction of the Reserve
Bank to the system provider that the operation of the
payment system shall not be carried out till the order of
revocation is issued.
(2) Nothing contained in sub-section (1) shall apply to a
case where the Reserve Bank considers it necessary
to revoke the authorisation given to a payment system
in the interest of the monetary policy of the country or
for any other reasons to be specified by it in the order.
(3) The order of revocation issued under sub-section
(1) shall include necessary provisions to protect and
safeguard the interests of persons affected by such
order of revocation.
(4) Where a system provider becomes insolvent or
dissolved or wound up, such system provider shall
inform, that fact to the Reserve Bank and thereupon
the Reserve Bank shall take such steps as deemed
necessary to revoke the authorisation issued to such
system provider to operate the payment system.
9. (1) Any applicant for an authorisation whose
Appeal to the
application for the operation of the payment system is
Central
refused under sub-section (3) of section 7 or a system
Government
provider who is aggrieved by an order of revocation
under section 8 may, within thirty days from the date on
which the order is communicated to him, appeal to the
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entral Government.
(2) The Central Government shall endeavour to dispose of an appeal under sub-section (1) within a eriod of three months.
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(3) The decision of the Central Government on the appeal under sub-section (1) shall be final.
CHAPTER IV
REGULATION AND SUPERVISION BY THE RESERVE
BANK
10. (1) The Reserve Bank may, from time to time,
Power to
prescribe—
determine
(a) the format of payment instructions and the size and
standards
shape of such instructions;
(
b) the timings to be maintained by payment systems;
(c) the manner of transfer of funds within the payment system, either through paper, electronic means or in any other manner, between banks or between banks nd other system participants;
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(d) such other standards to be complied with the ayment systems generally;
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(e) the criteria for membership of payment systems including continuation, termination and rejection of embership;
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(f) the conditions subject to which the system participants shall participate in such fund transfers and the rights and obligations of the system participants in uch funds.
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(2) Without prejudice to the provisions of sub-section (1), the Reserve Bank may, from time to time, issue such guidelines, as it may consider necessary for the roper and efficient management of the payment
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systems generally or with reference to any particular
payment system.
Notice of
11. (1) No system provider shall cause any change in
change in the
the system which would affect the structure or the
payment
operation of the payment system without—
system
(a) the prior approval of the Reserve Bank; and
Power to call for returns, documents or other information
Access to information
Power to enter and inspect
Information, etc., to be confidential
(b) giving notice of not less than thirty days to the system participants after the approval of the Reserve ank:
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Provided that in the interest of monetary policy of the country or in public interest, the Reserve Bank may permit the system provider to make any changes in a payment system without giving notice to the system participants under clause (b) or requiring the system provider to give notice for a period longer than thirty ays.
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(2) Where the Reserve Bank has any objection, to the proposed change for any reason, it shall communicate such objection to the systems provider within two weeks of receipt of the intimation of the proposed hanges from the system provider.
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(3) 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
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eceipt of approval from the Reserve Bank.
12. The Reserve Bank may call for from any system provider such returns or documents as it may require or other information in regard to the operation of his payment system at such intervals, in such form and in such manner, as the Reserve Bank may require from time to time or as may be prescribed and such order hall be complied with.
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3. The Reserve Bank shall have right to access any
information relating to the operation of any payment system and system provider and all the system participants shall provide access to such information to he Reserve Bank.
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14. Any officer of the Reserve Bank duly authorised by it in writing in this behalf, may for ensuring compliance with the provisions of this Act or any regulations, enter any premises where a payment system is being operated and may inspect any equipment, including any computer system or other documents situated at such premises and call upon any employee of such system provider or participant thereof or any other person working in such premises to furnish such information or documents as may be required by such fficer.
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5. (1) Subject to the provisions of sub-section (2), any
document or information obtained by the Reserve Bank under sections 12 to 14 (both inclusive) shall be kept onfidential.
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(2) Notwithstanding anything contained in sub-section (1), the Reserve Bank may disclose any document or information obtained by it under sections 12 to 14 (both inclusive) to any person to whom the disclosure of such document or information is considered necessary for
protecting the integrity, effectiveness or security of the payment system, or in the interest of banking or monetary policy or the operation of the payment ystems generally or in the public interest.
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16. The Reserve Bank may, for the purpose of carrying out its functions under this Act, conduct or get conducted audits and inspections of a payment system or participants thereof and it shall be the duty of the system provider and the system participants to assist the Reserve Bank to carry out such audit or inspection, s the case may be.
a
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7. 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, or is likely to result, in ystemic risk being inadequately controlled or
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(b) any action under clause (a) is likely to affect the payment system, the monetary policy or the credit olicy of the country,
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the Reserve Bank may issue directions in writing to such payment system or system participant requiring it, ithin such time as the Reserve Bank may specify –
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(i) to cease and desist from engaging in the act, omission or course of conduct or to ensure the system participants to cease and desist from the act, omission r course of conduct; or
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(ii) to perform such acts as may be necessary, in the opinion of the Reserve Bank, to remedy the situation. 8. Without prejudice to the provisions of the foregoing,
1
the Reserve Bank may, if it is satisfied that for the purpose of enabling it to regulate the payment systems or in the interest of management or operation of any of the payment systems or in public interest, it is necessary so to do, lay down policies relating to the regulation of payment systems including electronic, non-electronic, domestic and international payment systems affecting domestic transactions and give such directions in writing as it may consider necessary to system providers or the system participants or any other person either generally or to any such agency and in particular, pertaining to the conduct of business elating to payment systems.
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19. Every person to whom a direction has been issued by the Reserve Bank under this Act shall comply with such direction without any delay and a report of compliance shall be furnished to the Reserve Bank within the time allowed by it.
CHAPTER V
RIGHTS AND DUTIES OF A SYSTEM PROVIDER 20. Every system provider shall operate the payment system in accordance with the provisions of this Act, the regulations, the contract governing the relationship
Power to carry out audit and inspection
Power to issue directions
Power of Reserve Bank to give directions generally
Directions of Reserve Bank to be complied with
System provider to act in accordance with the Act,
Duties of a system provider
Duty to keep documents in the payment system confidential
Settlement and netting
among the system participants, the rules and regulations, etc regulations hich deal with the operation of the
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payment system and the conditions subject to which the authorisation is issued, and the directions given by he Reserve Bank from time to time.
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21. (1) Every system provider shall disclose to the existing or potential system participants, the terms and conditions including the charges and the limitations of liability under the payment system, supply them with copies of the rules and regulations governing the operation of the payment system, netting arrangements nd other relevant documents.
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(2) It shall be the duty of every system provider to maintain the standards determined under this Act
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2. (1)A system provider shall not disclose to any other
person the existence or contents of any document or part thereof or other information given to him by a system participant, except where such disclosure is required under the provisions of this Act or the disclosure is made with the express or implied consent of the system participant concerned or where such disclosure is in obedience to the orders passed by a court of competent jurisdiction or a statutory authority n exercise of the powers conferred by a statute.
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(
2) The provisions of the Bankers’ Book Evidence Act,
1891 shall apply in relation to the information or 18 of 1991 documents, or other books in whatever form
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aintained by the system provider.
23. (1) The payment obligations and settlement instructions among the system participants shall be determined in accordance with the gross or netting procedure, as the case may be, approved by the Reserve Bank while issuing authorisation to a payment ystem.
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(2) Where the rules providing for the operation of a payment system indicates a procedure for the distribution of losses between the system participants and the payment system, such procedure shall have effect notwithstanding anything to the contrary ontained in any other law for the time being in force.
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(3) A settlement effected under such procedure shall e final and irrevocable.
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(4) Where a system participant is declared by a court of competent jurisdiction as insolvent or is dissolved or ound up, then notwithstanding anything contained in
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the Companies Act, 1956 or the Banking Regulation
1 of 1956
Act, 1949 or any other law for the time being in force,
10 of 1949
the order of adjudication or dissolution or winding up,
as the case may be, shall not affect any settlement that
has become final and irrevocable and the right of the
system provider to appropriate any collaterals
contributed by the system participant towards its
settlement or other obligations in accordance with the ules, regulations or bye-laws of such system provider.
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Explanation.- For the removal of doubts, it is hereby declared that the settlement, whether gross or net, referred to in this section is final and irrevocable as soon as the money, securities, foreign exchange or derivatives or other transactions payable as a result of such settlement is determined, whether or not such money, securities or foreign exchange or derivatives or other transactions is actually paid.
CHAPTER VI
SETTLEMENT OF DISPUTES
24. (1) The system provider shall make provision in its rules or regulations for creation of panel consisting of not less than three system participants other than the system participants who are parties to the dispute to decide the disputes between system participants in respect of any matter connected with the operation of he payment system.
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(2) Where any dispute in respect of any matter connected with the operation of the payment system arises between two- or more system participants, the system provider shall refer the dispute to the panel eferred to in sub-section (1).
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(3) Where any dispute arises between any system participant and the system provider or between system providers or where any of the system participants is not satisfied with the decision of the panel referred to in sub-section (1), the dispute shall be referred to the eserve Bank.
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(4) The dispute referred to the Reserve Bank for adjudication under sub-section (3) shall be disposed of by an officer of the Reserve Bank generally or specially authorised in this behalf and the decision of the eserve Bank shall be final and binding.
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(5) Where a dispute arises between the Reserve Bank, while acting in its capacity as system provider or as system participant, and another system provider or system participant, the matter shall be referred to the Central Government which may authorise an officer not below the rank of Joint Secretary for settlement of the ispute and the decision of such officer shall be final.
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5. (1) Where an electronic funds transfer initiated by a
person from an account maintained by him cannot be executed on the ground that the amount of money standing to the credit of that account is insufficient to honour the transfer instruction or that it exceeds the amount arranged to be paid from that account by an agreement made with a bank, such person shall be deemed to have committed an offence and shall,
Settlement of disputes
Dishonour of electronic funds transfer for insufficiency, etc., of funds in the account
without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the electronic funds transfer, or ith both:
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Provided that nothing contained in this section shall pply unless—
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(a) the electronic funds transfer was initiated for payment of any amount of money to another person for the discharge, in whole or in part, of any debt or other iability;
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(b) the electronic funds transfer was initiated in accordance with the relevant procedural guidelines ssued by the system provider;
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(c) the beneficiary makes a demand for the payment of the said amount of money by giving a notice in writing to the person initiating the electronic funds transfer within thirty days of the receipt of information by him from the bank concerned regarding the dishonour of he electronic funds transfer; and
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(d) the person initiating the electronic funds transfer fails to make the payment of the said money to the beneficiary within fifteen days of the receipt of the said otice.
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(2) It shall be presumed, unless the contrary is proved, that the electronic funds transfer was initiated for the discharge, in whole or in part, of any debt or other iability.
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(3) It shall not be a defence in a prosecution for an offence under sub-section (1) that the person, who initiated the electronic funds transfer through an instruction, authorisation, order or agreement, did not have reason to believe at the time of such instruction, authorisation, order or agreement that the credit of his account is insufficient to effect the electronic funds ransfer.
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(4) The Court shall, in respect of every proceeding under this section, on production of a communication from the bank denoting the dishonour of electronic funds transfer, presume the fact of dishonour of such electronic funds transfer, unless and until such fact is
disproved.
(5) The provisions of Chapter XVII of the Negotiable
26 of 1881
Instruments Act, 1881 shall apply to the dishonour of
electronic funds transfer to the extent the
circumstances admit.
Explanation — For the purposes of this section, “debt
or other liability” means a legally enforceable debt or
other liability, as the case may be.
CHAPTER VII
OFFENCES AND PENALTIES
26. (1) Where a person contravenes the provisions of
Penalties
section 4 or fails to comply with the terms and
conditions subject to which the authorisation has been
issued under section 7, he shall be punishable with
imprisonment for a term which shall not be less than
one month but which may extend to ten years or with
fine which may extend to one crore rupees or with both
and with a further fine which may extend to one lakh
rupees for every day, after the first during which the
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ontravention or failure to comply continues.
(2) Whoever in any application for authorisation or in any return or other document or on any information required to be furnished by or under, or for the purpose of, any provision of this Act, wilfully makes a statement which is false in any material particular, knowing it to be false or wilfully omits to make a material statement, shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine which shall not be less than ten lakh rupees and hich may extend to fifty Iakh rupees.
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(3) If any person fails to produce any statement, information, returns or other documents, or to furnish any statement, information, returns or other documents, which under section 12 or under section 13, it is his duty to furnish or to answer any question relating to the operation of a payment system which is required by an officer making inspection under section 14, he shall be punishable with fine which may extend to ten Iakh rupees in respect of each offence and if he persists in such refusal, to a further fine which may extend to twenty-five thousand rupees for every day for hich the offence continues.
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(4) If any person discloses any information, the disclosure of which is prohibited under section 22, he shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five lakh rupees or an amount equal to twice the amount of the damages incurred by the act of such isclosure, whichever is higher or with both.
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(5) Where a direction issued under this Act is not complied with within the period stipulated by the Reserve Bank or where no such period is stipulated, within a reasonable time or where the penalty imposed by the Reserve Bank under section 30 is not paid within a period of thirty days from the date of the order, the system provider or the system participant which has failed to comply with the direction or to pay the penalty shall be punishable with imprisonment for a term which shall not be less than one month but which
Offences by companies
Cognizance of offences
may extend to ten years, or with fine which may extend to one crore rupees or with both and where the failure to comply with the direction continues, with further fine which may extend to one lakh rupees for every day, fter the first during which the contravention continues.
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(6) If any provision of this Act is contravened, or if any default is made in complying with any other requirement of this Act, or of any regulation, order or direction made or given or condition imposed thereunder and in respect of which no penalty has been specified, then, the person guilty of such contravention or default, as the case may be, shall be punishable with fine which may extend to ten lakh rupees and where a contravention or default is a continuing one, with a further fine which may extend to twenty-five thousand rupees for every day, after the first during which the contravention or default ontinues.
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27. (1) Where a person committing a contravention of any of the provisions of this Act or any regulation, direction or order made there under is a company, every person who, at the time of the contravention, was in-charge of, and was responsible to, the company for the conduct of business of the company, as well as the company, shall be guilty of the contravention and shall be liable to be proceeded against and punished ccordingly:
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Provided that nothing contained in this sub-section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to revent such contravention.
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(2) Notwithstanding anything contained in sub-section (1), where a contravention of any of the provisions of this Act or of any regulation, direction or order made thereunder has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished ccordingly.
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xplanation.- For the purposes of this section,—
(a) “company” means anybody corporate and includes a firm or other association of individuals; and
(
b) "director", in relation to a firm, means a partner in
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he firm.
28.: (1) No court shall take cognizance of an offence punishable under this Act except upon a complaint in writing made by an officer of the Reserve Bank
generally or specially authorised by it in writing in this behalf, and no court, lower than that of a Metropolitan Magistrate or a Judicial Magistrate of the first class shall try any such offence:
Provided that the Court may take cognizance of an offence punishable under section 25 upon a complaint in writing made by the person aggrieved by the dishonour of the electronic funds transfer.
(2) Notwithstanding anything contained in the Code of 2 of 1974 Criminal Procedure, 1973, a Magistrate may dispense with the personal attendance of the officer of the Reserve Bank filing the complaint, but the Magistrate may, in his discretion, at any stage of the proceedings,
direct the personal attendance of the complainant.
29. A court imposing any fine under this Act may direct that the whole or any part thereof shall be applied in, or towards payment of, the costs of the proceedings.
30. (1) Notwithstanding anything contained in section
26, if a contravention or default of the nature referred to in sub-section (2) or sub-section (6) of section 26, as the case may be, the Reserve Bank may impose on the person contravening or committing default a penalty not exceeding five lakh rupees or twice the amount involved in such contravention or default where such amount is quantifiable, whichever is more, and where such contravention of default is a continuing one, a further penalty which may extend to twenty-five thousand rupees for every day after the first during which the contravention or default continues.
(2) For the purpose of imposing penalty under sub-section (1), the Reserve Bank shall serve a notice on the defaulter requiring him to show cause why the amount specified in the notice should not be imposed as a penalty and a reasonable opportunity of being heard shall also be given to such defaulter.
(3) Any penalty imposed by the Reserve Bank under this section shall be payable within a period of thirty days from the date on which notice issued by the Reserve Bank demanding payment of the sum is served on the defaulter and, in the event of failure of the person to pay the sum within such period, may be recovered on a direction made by the principal civil court having jurisdiction in the area where the registered office of the defaulter company or the official business of the person is situated:
Provided that no such direction shall be made except on an application made by an officer of the Reserve Bank authorised by it in this behalf.
(4) The Reserve Bank may recover the amount of penalty by debiting the current account, if any, of the defaulter or by liquidating the securities held to the credit of the defaulter or in accordance with the
Application of fine
Power of Reserve Bank to impose fines
Power to compound offences
Act to have overriding effect
Mode of recovery of penalty
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rovisions of this Act.
(5) The court which makes a direction under sub-section (3) shall issue a certificate specifying the sum payable by the defaulter and every such certificate shall be enforceable in the same manner as it were a ecree made by the court in a civil suit.
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(6) Where any complaint has been filed against any person in any court in respect of the contravention or default of the nature referred to in sub-section (2), or, as the case may be, sub-section (4) of section 26, then, no proceeding for the imposition of any penalty n the person shall be taken under this section.
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31. (1) Notwithstanding anything contained in the Code
of Criminal Procedure, 1973, any offence punishable 2 of 1974 under his Act for any contravention, not being an
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offence punishable with imprisonment only, or with imprisonment and also with fine, may, on receipt of an application from the person committing such contravention either before or after the institution of any proceeding, be compounded by an officer of the eserve Bank duly authorised by it in this behalf.
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(2) Where a contravention has been compounded under sub-section (1) no proceeding or further proceeding, as the case may be, shall be initiated or continued, as the case may be, against the person committing such contravention under that section, in respect of the contravention so compounded.
CHAPTER VIII
MISCELLANEOUS
32. The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.
33. (1) The penalty imposed on the defaulter by the Reserve Bank under section 30 may be recovered by issuing a notice to any person from whom any amount is due to the defaulter, by requiring such person to deduct from the amount payable by him to the defaulter, the amount payable to the Reserve Bank by ay of penalty and pay to the Reserve Bank.
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(2) Save as otherwise provided in this section, every person to whom a notice is issued under this sub-section shall be bound to comply with such notice, and, in particular, where such notice is issued to a post office, bank or an insurer, it shall not be necessary for any passbook, ‘deposit receipt, policy or any other document to be produced for the purpose of any entry, endorsement or the like being made before payment is made notwithstanding that any rule, practice or equirement to the contrary.
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(3) Any claim respecting any property in relation to which a notice under this sub-section has been issued
arising after the date of the notice shall be void as
against any demand contained in the notice. (4) Where a person to whom the notice under this sub-
section is sent objects to it by a statement on oath that the sum demanded or any part thereof is not due to the
defaulter or that he does not hold any money for or on account of the defaulter, then, nothing contained in this
sub-section shall be deemed to require such person to
pay any such sum or part thereof, as the case may be,
but if it is discovered that such statement was false in any material particular, such person shall be personally
liable to the Reserve Bank to the extent of his own
liability to the defaulter on the date of the notice, or to
the extent of the penalty imposed on the defaulter by
the Reserve Bank, whichever is less.
(5) The Reserve Bank may at any time or from time to
time, amend or revoke any notice issued under this
section or extend the time for making the payment in
pursuance of such notice;
(6) The Reserve Bank shall grant a receipt for any
amount paid to it in compliance with a notice, issued
under this section and the person so paying shall be
fully discharged from his liability to the defaulter to the
extent of the amount so paid.
(7) Any person discharging any liability to the defaulter
after the receipt of a notice under this section shall be
personally liable to the Reserve Bank to the extent of
his own liability to the defaulter so discharged or to the
extent of the penalty imposed on the defaulter by the
Reserve Bank, whichever is less.
(8) If the person to whom the notice under this section
is sent fails to make payment in pursuance thereof to
the Reserve Bank, he shall be deemed to be the
defaulter in respect of the amount specified in the
notice and further proceedings may be taken against
him for the realisation of the amount as if it were an
arrear due from him in the manner provided in this
section.
Explanation.- For the purposes of this section,
“defaulter” means any person or system provider or system participant on whom the Reserve Bank has
imposed a penalty under section 30.
34. Nothing contained in this Act shall apply to stock
exchanges or the clearing corporations of the stock
exchanges.
35. (1) Every officer of the Reserve Bank who has
been entrusted with any power under this Act, shall be
deemed to be a public servant within the meaning of
45 of 1860
section 21 of the Indian Penal Code.
Act not to apply to stock ex-changes or clearing corporations of stock exchange
Certain persons deemed to be public servants
Power to remove difficulties
Power of Reserve Bank to make regulations
36. No suit or other legal proceedings shall lie against the Central Government, the Reserve Bank, or any officer thereof for any damage caused or likely to be caused by anything which is in good faith done or intended to be done in pursuance of this Act, any regulations, order or direction made or given hereunder.
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7. (1) If any difficulty arises in giving effect to the
provisions of this Act, the Central Government may, by order published in the Official Gazette, make such provision is not inconsistent with the provisions of this Act as appear to it to be necessary or expedient for emoving the difficulty:
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Provided that no order shall be made under this section after the expiry of a period of two years from the ommencement of this Act.
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(2) Every order made under this section shall be laid, as soon as may be after it is made, before each House f Parliament.
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38. (1) The Reserve Bank may, by notification, make regulations consistent with this Act to carry out the rovisions of this Act.
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(2) In particular, and without prejudice to the generality of the foregoing provision, such regulations may provide for all or any of the following matters, amely:—
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(a) the powers and Functions of the Committee constituted under sub-section (2), the time and venue of its meetings and the procedure to be followed by it at its meetings (including the quorum at such meetings) nder sub-section (4) of section 3;
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(b) the form and manner in which an application for authorisation for commencing or carrying on a payment system shall be made and the fees which shall accompany such application under sub-section (2) of ection 5;
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(c) the form in which an authorisation to operate a payment system under this Act shall be issued under ub-section (2) of section 7;
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(d) the format of payment instructions and other matters relating to determination of standards to be complied with by the payment systems under sub-ection (1) of section 10;
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(e) the intervals, at which and the form and manner in which the information or returns required by the eserve Bank shall be furnished under section 12;
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(f) such other matters as are required to be, or may be, rescribed.
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(2) Any regulation made under this section shall have effect from such earlier or later date (nor earlier than the date of commencement of this Act) as may be specified in the regulation.
Protection of action taken in good faith
(3) Every regulation shall, as soon as may be after it is made by the Reserve Bank, be forwarded to the Central Government and that Central Government shall cause a copy of the same to be laid before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the regulation, or both Houses agree that the regulation should not be made, the regulation shall, thereafter, have effect only in such modified form or be of no effect, as the case may be; so however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that regulation.
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