RBI Forms New Payments Board
The Reserve Bank of India has notified the formation of a new six-member Payment Regulatory Board to oversee all payment systems nationwide. The move signals continued policy evolution in digital payments, likely affecting KYC, merchant onboarding, and UPI transaction rules.
This move is a direct outcome of the 2016 Ratan Watal Committee report, which recommended making payments regulation independent from the central banking function to foster competition and innovation. The committee urged for an updated legal framework to ensure interoperability between banks and non-banks, enhance consumer protection, and safeguard digital transactions. The new board's structure, including three central government nominees, marks a significant shift, giving the government a greater say in the payment ecosystem's direction. This is a departure from the previous Board for Regulation and Supervision of Payment and Settlement Systems (BPSS), which was a sub-committee of the RBI's Central Board without direct government representation. A key driver for this regulatory overhaul is the sheer scale and the associated risks of India's digital payment ecosystem. In fiscal year 2024-25, India recorded 12.64 lakh UPI-related fraud cases amounting to ₹981 crore, following losses of ₹1,087 crore in the previous year. The new board is expected to introduce a more robust supervisory framework to tackle these vulnerabilities. The board’s agenda will likely be shaped by the RBI's Payments Vision 2025, which aims for a threefold increase in digital payment transactions. Core objectives of this vision include enhancing the integrity of payment systems, fostering innovation, and promoting the internationalization of India's payment platforms like UPI. For fintechs, this signals a more unified regulatory environment, particularly for payment aggregators and payment banks who will be directly supervised by this new body. The inclusion of the Ministry of Electronics and Information Technology (MeitY) secretary on the board suggests a closer alignment between regulatory policy and the government's Digital India objectives. The board is also tasked with addressing long-standing issues like the Merchant Discount Rate (MDR) and simplifying KYC procedures. The Ratan Watal Committee had emphasized the greater use of Aadhaar for e-KYC and creating a more favorable cost structure for merchants to accelerate digital payment adoption.
