The Reserve Bank of India (RBI) has announced tighter regulations for imposing monetary penalties and compounding offences under the Payment and Settlement Systems Act (PSS Act) in a bid to streamline and strengthen its enforcement actions against payment system operators and banks. The revised framework, unveiled on Thursday, aims to rationalise the enforcement process and ensure compliance with regulatory norms.
Under the updated framework, violations such as operating a payment system without proper authorisation, disclosing prohibited information, and failing to pay penalties imposed by the RBI within the prescribed period will be treated as contraventions under the PSS Act.
Increased Penalties for Non-Compliance
As per the new rules, the RBI is now authorised to impose penalties of up to Rs 10 lakh, or twice the amount involved in the contravention (if the amount can be quantified), whichever is higher. This represents a significant increase from the previous penalty cap of Rs 5 lakh, which was revised following the enactment of the Jan Vishwas (Amendment of Provisions) Act, 2023, which came into force on January 22, 2024.
Additionally, for continuing contraventions or defaults, the RBI can impose a daily penalty of up to Rs 25,000 for each day the violation persists after the initial contravention.
Compounding of Offences
The revised framework also specifies that an authorised RBI officer can compound contraventions that do not involve imprisonment, in line with the provisions of the PSS Act. The RBI clarified that only material contraventions will be subjected to enforcement actions, including the imposition of monetary penalties or the compounding of offences.
Streamlining Enforcement Actions
The updated framework introduces clearer procedures for imposing penalties and determining their amounts. It seeks to ensure that enforcement actions are efficient, transparent, and consistent, with an emphasis on tackling significant violations that could impact the integrity of the payment systems.
By consolidating these enforcement measures, the RBI aims to strengthen compliance and regulatory oversight within the payment systems sector, reinforcing its commitment to maintaining a secure and reliable financial infrastructure.
