Govt nominees in Payments Regulatory Board may help bridge RBI-FinMin gap

The representation of three central government-nominated executives on the Payments Regulatory Board (PRB) is expected to help resolve differences between the Reserve Bank of India (RBI) and the Ministry of Finance, sources in the know said. This would pave the way for a more coordinated approach to payments regulation, they said.

 

The top priorities for the new board could include decisions on how Unified Payments Interface (UPI) is incentivised in the future, the long-awaited introduction of a merchant discount rate (MDR) for real-time payments system, and the internationalisation of India’s payments infrastructure, among other issues.

 

The regulatory overhaul follows the Centre’s notification of the ‘Payments Regulatory Board Regulations, 2025’ last week, which will replace the current Board for Regulation and Supervision of Payment and Settlement Systems (BPSS). Once completely constituted, the Department of Payment and Settlement Services at the RBI will now report to the PRB once it is.

 

“There were many issues within the payments industry that were outside the RBI’s scope but they regulated it. There was also confusion about the jurisdiction of affairs between the ministry and the RBI. With central government representation on the PRB, these issues can now be solved with proper coordination,” an industry executive with knowledge of the matter said. The exact nature of nominees is yet to be known, the sources added. 

 

While the notification on PRB mentions that the board may invite people with expertise in payment and settlement systems, information technology, and law, it is expected that ministries such as electronics and information technology (MeitY), telecommunications, and financial services could be tapped for representation, given their unique exposure to payments in India.

 

“The board’s diversity can help address critical issues such as customer safety, maintaining a level-playing field, developing a viable economic model for payment products, and giving non-bank players a seat at the table,” said Mihir Gandhi, partner and payments transformation & fintech leader at PwC India. “The board could also explore if other payment infrastructures are required for resilience and smooth operations for customers,” Gandhi said.

 

However, private players and their associations are unlikely to be given representation on the board.

 

The PRB notification comes just months after RBI Governor Sanjay Malhotra assumed office. Malhotra, who was the revenue secretary, is seen as well-positioned since he enjoys the trust of the finance ministry and is heading the banking regulator, the sources added.

 

“For example, the RBI believes UPI needs to carry an MDR. Earlier, there was an MDR for RuPay debit cards as well, but the finance ministry superseded the RBI and made it zero. Then, there was a lot of friction saying whose role is it to make a decision in this case,” a source said requesting anonymity, explaining the need of the new board.

 

Industry participants believe the new board will enable innovation in India’s payments ecosystem.

 

“Right industry representation can lead to greater innovation, be it expanding tokenisation to drive device-based payments or introducing newer entities like NUEs (new umbrella entities) to balance ever-growing digital payments volumes,” said Ranadurjay Talukdar, partner and payments sector leader, EY India.