India Sets Up New Payments Regulatory Board with Shared RBI–Government Oversight
India has created the Payments Regulatory Board (PRB), a major change in how the country regulates its fast-growing digital payments sector. This new body replaces the Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) and, for the first time, shares regulatory authority between the Reserve Bank of India (RBI) and the central government.
From Past Frameworks to a New Era
India’s regulation of payment systems began with the Banking Regulation Act of 1949, followed by the Payment and Settlement Systems Act of 2007, which gave the RBI direct control over payment platforms. But the widespread use of tools like UPI, Aadhaar-enabled payments, and prepaid payment instruments (PPIs) brought new challenges—such as ensuring systems work smoothly together, removing oversight gaps, and responding quickly to emerging issues.
PRB’s Structure and Goals
The PRB builds on India’s history of strong financial governance—covering consumer protection, KYC compliance, cybersecurity resilience, and risk management. In line with an earlier RBI recommendation for continuity and technical skill, the PRB has six members—three from the RBI and three appointed by the government.
Its mission supports India’s vision for financial inclusion, innovation, and safety in payments.
India accounted for nearly half of global real-time digital payment transactions in 2024. With this scale come risks—from system overload to sophisticated cyber threats. The PRB’s hybrid structure aims to move quickly, balancing innovation with strong safeguards.
Impact on Banks, FinTechs, and Consumers
Banks and payment providers will face new compliance needs—from tokenised payments and AI-based fraud detection to digital currency pilots. FinTech companies can expect clearer guidelines for areas like blockchain, programmable payments, and cross-border transactions.
Growing UPI fraud cases are also on the PRB’s radar, with plans for more targeted risk control.
Inclusion of Technical and Industry Experts
The PRB is expected to include experts in cybersecurity, data privacy, and digital law—either as permanent members or invited specialists—to handle issues such as UPI outages and infrastructure bottlenecks. It may also consult external representatives from telecom, e-commerce, and retail, ensuring policy decisions align with broader industry needs.
Regulations on QR codes, prepaid instruments, and merchant onboarding are likely to be updated to better balance consumer safety with innovation.
Global Comparisons and Future Moves
The PRB’s structure is similar to Australia’s Payments System Board, which also blends central bank leadership with government-appointed members. In India, this approach could help revive policy debates on issues like merchant discount rates (MDR) and the New Umbrella Entity (NUE).
RBI’s Digital Payments Index hit 465.33 in September 2024, showing rapid adoption and reach. The PRB is not just reacting to this growth—it aims to strengthen India’s digital finance core for the future, speed up policy approvals, promote open systems, and ensure players in the UPI space remain sustainable.
Looking Ahead
With joint oversight from the RBI and the government, the PRB is designed to encourage innovation while managing systemic risks. It could also support new payment methods such as wearables, facial recognition payments, and palm authentication, offering both convenience and extra security to consumers.
In the short term, priority areas include tightening rules for QR code-based merchant acceptance and prepaid payment instruments, while keeping India’s digital payments environment fast-moving and inclusive.
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