A “payment system” means a system that enables payment to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them.
Clearing refers to the process wherein the payment service provider acts as the counterparty between the buyer and seller by calculating the obligations between them and guaranteeing its settlement. Settlement relates to the final act of changing the records of ownership of the asset transacted, either after netting all the cross obligations or for each one transaction individually on gross terms.
A “payment system” as understood in India, can include the systems enabling credit card operations, debit card operations, smart card operations, money transfer operations or such similar operations. All entities operating such systems (money transfer systems or card payment systems or similar systems) are known as payment system providers. To decide whether a particular entity operates the payment system, it must perform either the clearing or settlement or payment function or all of them.
The Payment and Settlement Systems Act, 2007 (PSS Act, 2007) which came into force with effect from 12 August 2008, provides for the regulation and supervision of payment systems in India and designates the Reserve Bank of India (Reserve Bank) as the authority for that purpose and all related matters. The Act excludes stock/commodity exchanges and their clearing corporations from the purview of the Act, even though they constitute payment systems. Stock /commodity exchanges and Clearing Corporations are regulated by the securities market regulator – SEBI -in India.
Reserve Bank of India has issued Certificates of Authorisation under the Payment and Settlement Systems Act, 2007 for Setting up and Operating Payment System in India. The names of entities which have received such certificates and the names of their payment facilities are given on the website of RBI.
- Unified Payments Interface
- Prepaid Payment Instruments (PPIs)
- Payment System
- Digital Electronic Wallet
FAQ of RBI on Payment and Settlement Systems Act, 2007