Background
The Reserve Bank of India (“RBI”) has made a big change in how it oversees India’s growing digital payments landscape. RBI has released the ‘Payments Regulatory Board Regulations, 2025’ (“Regulations”). These Regulations, published on 20th May 2025, are a key step towards making the rules for payment and settlement systems in India stronger and better.
The Change: From BPSS to PRB
The main point of this change is the creation of the Payments Regulatory Board (“PRB/Board”). The new Regulations say that the Board will take over from the old Board for Regulation and Supervision of Payment and Settlement Systems Regulations, 2008. This change shows that the RBI is updating how it manages payment systems. It’s moving from an older supervisory board to a new regulatory body with a clear job. This move highlights the RBI’s plan to adjust its oversight to the fast-changing digital payments landscape.
What the Board Does and Its Powers
The PRB gets its power directly from the Payment and Settlement Systems Act, 2007 (“PSSA”), specifically from certain sections (sub-section (4) of section 3 and sub-sections (1) and (2) of section 38). While the Regulations mainly explain how the Board is set up and how it works, its main goal, as understood from the PSSA, is to control and watch over payment and settlement systems in India. This wide-ranging job includes, but isn’t limited to:
(a) Making rules for payment and settlement systems to work well.
(b) Giving instructions to companies working in this area.
(c) Making sure all payment and settlement activities across the country run smoothly, safely, and efficiently.
The Board can give some of its duties to its Chairperson, a Member, a smaller Committee, or officers of the Bank to help run things efficiently. Also, the RBI’s Department of Payment and Settlement Systems (DPSS) will help the Board, showing its important and powerful role in regulating payments.
Who the Board Will Regulate
A big question for entities in the financial technology sector is exactly which entities will be under the Board’s control. Since the Board operates under the PSSA, its power covers all ‘payment systems’ as defined by that PSSA. This broad definition means many different players in the digital payments realm will be under its watch. Specifically, this includes:
(a) Prepaid Payment Instruments (PPIs): Companies that issue PPIs, like mobile wallets and gift cards, are a crucial part of the payment system. They run payment systems, so the Board will definitely regulate them.
(b) Payment Aggregators (PAs): PAs help with online payments by bringing merchants on board and processing payments. Their vital role in the payment process means they will also be regulated by the Board, ensuring they follow operational and security rules.
(c) Payment Banks: These are a special type of bank licensed by the RBI mainly to offer payment services. Payment Banks are naturally part of the payment and settlement system. So, the Board will directly regulate and supervise their operations, making sure they adhere to the Regulations and protect customers.
In essence, any company that runs, helps with, or takes part in a payment or settlement system in India, as defined by the PSSA, will be subject to these Regulations and oversight of the Board. This wide scope ensures a consistent and strong way of regulating all kinds of digital financial transactions.
What This Means
Setting up the Board shows the RBI’s ongoing dedication to creating a safe, efficient, and new payments environment. By putting regulatory power in the Board’s hands, the RBI aims to make governance simpler, adapt to new payment technologies, and build more trust among consumers. This change is expected to bring more clarity and possibly quicker decisions to the regulation of India’s active payment systems, affecting all companies in this important sector. Those involved should thoroughly learn about these new Regulations to stay compliant and position themselves well within the changing regulatory landscape.
Disclaimer
The note is prepared for knowledge dissemination and does not constitute legal, financial or commercial advice. AK & Partners or its associates are not responsible for any action taken based on its contents.
