The Reserve Bank of India (RBI) which is India’s central bank has objected against the Indian government’s plan to set-up a separate Payments Regulatory Board (PRB) in the country. The Central Government is very keen in moving forward with this plan but is facing some stiff opposition from the RBI. Representatives of the RBI are not against the creation of the PRB but want it to stay under the RBI governor’s oversight.
The initial idea for a PRB was floated earlier this year during the draft of this year’s Payment and Settlement System Bill. The RBI shot that proposal down on the basis that the current system is working fine and has led to growth in the economy and hence does not want any major changes.
This continues the recent trend of the RBI insisting on controlling all financial regulation in the country. The central bank recently blocked a government proposal for public debt management body to be created which would also operate independently of the bank.
In a statement, the RBI said
The composition of the PRB is also not in conformity with the announcements made in the Finance Bill by the Finance Minister. Since banks are regulated by the RBI, a holistic regulation by the RBI would be more effective and not result in increased compliance costs if multiple regulators exist for related systems. Almost all countries in the world have recognized this change which has gained significance in the recent past.
Answering to the concerns made by the committee that non-banks should also have access when it comes to payment systems, the RBI pointed out that several payment systems were being run by non-banks, this included card companies, prepaid payment issuers, and other financial institutions.
One of the other objections raised by the RBI has to do with the designation of the Securities Appellate Tribunal (SAT) for addressing grievances. The central bank was critical of this since the SAT is mainly focused on securities and not payments.
Modi Government Experiments Keep Failing
The Government’s reasoning behind moving the administering of payments outside the RBI’s jurisdiction is that the central bank should focus on its job as a bank rather than a regulator. However, the central bank pointed out that payment systems are quickly becoming currency substitutes in today’s world. This means that governing them should be part of the RBI’s duties.
The BJP led government has experimented with numerous financial experiments during the last four years such as de-monetization and the implementation of GST which have all turned out to be failures that has hurt the common man. The new push for a PRB is yet another move by the BJP government that is threating to change things in the country but the RBI and the common man are not confident given the repercussions of the previous changes brought about.
