The Reserve Bank of India (RBI) has unveiled a new comprehensive framework aimed at enhancing regulatory compliance and maintaining the integrity of the digital payments ecosystem. The framework, which is established under the Payment and Settlement Systems Act, 2007, focuses on imposing penalties and compounding offences for violations within the payment and settlement systems sector.
Key Highlights of the RBI’s Framework:
Offences Covered: The framework addresses various offences, including:
- Unauthorized operation of payment systems
- Providing false information
- Failure to produce required documents
- Non-compliance with RBI directives
Penalty Structure: Violations can result in penalties up to INR 1 million (USD 11,490), or twice the amount involved in the violation (whichever is higher). For ongoing violations, daily fines may be imposed to encourage timely resolution.
Enforcement Authorities: The RBI has designated specific authorities, including committees of executive directors and regional directors, to enforce penalties and resolve compounding offences. These authorities will prioritize cases based on factors such as the severity of the offence, frequency, and financial impact.
Principles of Penalty Determination: The penalties will be assessed based on:
- Proportionality: Fines will be in line with the nature of the violation.
- Intent: Whether the violation was intentional or accidental.
- Mitigating Factors: Circumstances that may reduce the penalty.
If penalties are deemed disproportionate to the impact of the violation, adjustments may be made.
Penalty Settlement Process: The RBI has streamlined its settlement process, offering entities the opportunity to pay 25% less than the total penalty amount to resolve certain offences. However, entities that commit repeated offences will face higher compounding fees.
Transparency and Accountability: The RBI ensures transparency by requiring public disclosure of penalties. This includes recording actions in financial statements and issuing press releases to inform the public about the regulatory actions.
Objective:
The framework is designed to ensure a secure and compliant digital payment ecosystem by enforcing strict accountability. It aims to deter unlawful activities in the financial space, enhancing regulatory oversight. The RBI’s effort in simplifying the penalty settlement process and increasing the frequency of penalties reinforces its commitment to maintaining integrity and enforcing compliance.
This move marks a significant step towards fortifying the RBI’s authority in managing the growing and dynamic digital payments sector in India. By establishing clear guidelines, the central bank aims to create a stable and trustworthy environment for consumers and businesses operating in the digital financial space.
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