New Act To Bring E-Fund Transfers Under Rbi Ambit

The Reserve Bank of India (RBI), in consultation with the National Payment Council, is giving final touches to the draft of the Payment Systems Regulations Act. The proposed Act will bring in all electronic fund transfers in the country -- be it money orders or settlements at payment gateways, stock and commodity exchanges or clearing houses -- under the jurisdiction of the RBI.

This is a logical follow up of the Information Technology Act which has paved the path for digital signatures and digital contracts.

The proposed Act will bring in the entire e-commerce payments system under RBI's direct control. The RBI had earlier appointed Herbert Smith, an international law firm, to look into the issues relating to the payment systems.

 

The firm advises its clients on corporate, finance and dispute resolution matters and offers a range of specialist services. Herbert Smith has a strategic alliance with leading German law firm Gleiss Lutz.

According to sources, the central bank along with a task force of the National Payment Council is working on a payment systems legislation which may include three Acts -- Payment System Regulation Act, Payment System Netting Act and Electronic Fund Transfer Act.

Together, these Acts will cover all electronic fund transfers including inter-bank payments, pay orders, remittances and transactions done through ATMs, credit and debit cards besides money orders and other settlements in clearing houses and stock exchanges.

Significantly, the focus will be on "netting" in stock exchanges as well as clearing houses. Once these settlements come under the RBI control, a system of margin and security funds will be put in place to protect the participants from insolvency and bankruptcy. In other words, the payments crisis in stock exchanges or a Madhavpura-type settlement problem in clearing houses can be averted.

Even the payment gateways and commodity exchanges will come under the RBI jurisdiction.

The money order system run by the department of post, Government of India in alliance with Western Union Financial Services Inc will also come under the RBI purview.

Western Union, a worldwide leader in money transfer services, recently tied up with the department of post. The tie-up will speed up the transfer of money riding on the new technology wave.