The Payment and Settlement Systems Act, 2007

(1) This Act may be called the Payment and SettlementSystems Act, 2007. (2) It extends to the whole of India. (3) It shall come into force on such date1 as the Central Government may, by notification in theOfficial Gazette, appoint and different dates may be appointed for different provisions of this Act, andany reference to the commencement in any such provision of this Act shall be construed as a reference tothe commencement of that provision.

(1) In this Act, unless the context otherwise requires,-- (a) "bank" means,-- (i) a bank included in the Second Schedule to the Reserve Bank of India Act,1934 (2 of 1934); (ii) a post office savings bank; (iii) a banking company as defined in clause (c) of section 5 of the Banking Regulation Act,1949 (10 of 1949); (iv) a co-operative bank as defined in clause (cci) of section 5, as inserted by section 56 of theBanking Regulation Act, 1949 (10 of 1949); and (v) such other bank as the Reserve Bank may, by notification, specify for the purposes of thisAct; (b)"derivative" means an instrument, to be settled at a future date, whose value is derived fromchange in interest rate, foreign exchange rate, credit rating or credit index, price of securities (alsocalled "underlying"), or any other underlying or a combination of more than one of them and includesinterest 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 specifiedby the Reserve Bank from time to time; (c) "electronic funds transfer" means any transfer of funds which is initiated by a person by wayof instruction, authorisation or order to a bank to debit or credit an account maintained with that bankthrough electronic means and includes point of sale transfers, automated teller machine transactions,direct deposits or withdrawal of funds, transfers initiated by telephone, internet and card payment; (d) "gross settlement system" means a payment system in which each settlement of funds orsecurities occurs on the basis of separate or individual instructions; 1[(da) "issuer" means a person who issues a legal entity identifier or such other uniqueidentification (by whatever name called), as may be specified by the Reserve Bank from time to time; (db) "legal entity identifier" means a unique identity code assigned to a person by an issuer forthe purpose of identifying that person in such derivatives or financial transactions, as may bespecified by the Reserve Bank from time to time;] (e) "netting" means the determination by the system provider of the amount of money orsecurities, due or payable or deliverable, as a result of setting off or adjusting, the paymentobligations or delivery obligations among the system participants, including the claims andobligations arising out of the termination by the system provider, on the insolvency or dissolution orwinding up of any system participant or such other circumstances as the system provider may specifyin its rules or regulations or bye-laws (by whatever name called), of the transactions admitted forsettlement at a future date so that only a net claim be demanded or a net obligation be owned; (f) "notification" means a notification published in the Official Gazette; (g) "payment instruction" means any instrument, authorisation or order in any form, includingelectronic means, to effect a payment,-- (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 toanother system participant as a result of clearing or settlement of one or more payment instructionsrelating to funds, securities or foreign exchange or derivatives or other transactions; (i) "payment system" means a system that enables payment to be effected between a payer and abeneficiary, involving clearing, payment or settlement service or all of them, but does not include astock exchange. Explanation.--For the purposes of this clause, "payment system" includes the systems enablingcredit card operations, debit card operations, smart card operations, money transfer operations orsimilar operations; (j) "prescribed" means prescribed by regulations made under this Act; (k) "regulation" means a regulation made under this Act; (l) "Reserve Bank" means the Reserve Bank of India, constituted under the Reserve Bank of IndiaAct, 1934 (2 of 1934); (m) "securities" means the Government securities as defined in the Public Debt Act,1944 (18 of 1944) or such other securities as may be notified by the Central Government from time totime under that Act; (n) "settlement" means settlement of payment instructions and includes the settlement ofsecurities, foreign exchange or derivatives or other transactions which involve payment obligations; (o) "systemic risk" means the risk arising from-- (i) the inability of a system participant to meet his payment obligations under the paymentsystem as and when they become due; or (ii) any disruption in the system, which may cause other participants to fail to meet their obligations when due and is likely to have animpact on the stability of the system: Provided that if any doubt or difference arises as to whether a particular risk is likely to have animpact on the stability of the system, the decision of the Reserve Bank shall be final; (p) "system participant" means a bank or any other person participating in a payment system andincludes the system provider; (q) "system provider" means a person who operates an authorised payment system; 3[(r) "trade repository" means a person who is engaged in the business of collecting, collating,storing, maintaining, processing or disseminating electronic records or data relating to suchderivatives or financial transactions, as may be specified by the Reserve Bank from time to time.] (2) Words and expressions used, but not defined in this Act and defined in the Reserve Bank of IndiaAct, 1934 (2 of 1934) or the Banking Regulation Act, 1949 (10 of 1949), shall have the meaningsrespectively assigned to them in those Acts.

1[3. Designated authority.--(1) The Reserve Bank shall be the designated authority for the regulationand supervision of payment systems under this Act. (2) The Reserve Bank shall exercise the powers, perform the functions and discharge the dutiesconferred on it under this Act through a Board to be known as the "Payments Regulatory Board". (3) The Board shall consist of the following members, namely:-- (a) the Governor of the Reserve Bank-Chairperson, ex officio; (b) the Deputy Governor of the Reserve Bank in-charge of the Payment and Settlement Systems-Member, ex officio; (c) one officer of the Reserve Bank to be nominated by the Central Board of the Reserve Bank-Member, ex officio; and (d) three persons to be nominated by the Central Government-Members. (4) The powers and functions of the Board referred to in sub-section (2), the time and venue of itsmeetings, the procedures to be followed in such meetings (including the quorum at such meetings) andother matters incidental thereto shall be such as may be prescribed.]

(1) No person, other than the ReserveBank, shall commence or operate a payment system except under and in accordance with an authorisationissued by the Reserve Bank under the provisions of this Act: 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 aperiod not exceeding six months from such commencement, unless within such period, the operatorof such payment system obtains an authorisation under this Act or the application for authorisationmade 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 subsidiarycompanies 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 monetarypolicy or efficient operation of payment systems, the size of any payment system or for any otherreason, 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 corporationto operate or regulate the existing clearing houses or new clearing houses of banks in order to have acommon 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 corporationshall be held by public sector banks. "Explanation".--For the purposes of this clause, "public sector banks" shall include a "correspondingnew bank", "State Bank of India" and "subsidiary bank" as defined in section 5 of the BankingRegulation Act, 1949 (10 of 1949).

(1) Any person desirous of commencing or carrying on apayment 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 beaccompanied by such fees as may be prescribed.