Rajya Sabha passed Payments and Settlement Systems (Amendment) Bill, 2014
The amendment bill seeks to amend the Payment and Settlement Systems Act, 2007 and is aimed at bringing India's banking payment system in sync with international practices.
The Rajya Sabha on 27 April 2015 passed Payments and Settlement Systems (Amendment) Bill, 2014 with voice vote. With this the bill has been passed by both the houses of Parliament. It was passed by the Lok Sabha on 9 December 2014.
The bill seeks to amend the Payment and Settlement Systems Act, 2007 so as to address the problem of insolvency in the payment and settlement system by increasing transparency. It is also aimed at bringing India's banking payment system in sync with international practices.
Main highlights of the Bill
It seeks to extend the application of the 2007 Act to a designated trade repository, or issuer, in relation to payment systems. It has introduced three definitions in regard to this and they are
a) Issuer: It means a person who issues a legal entity identifier or similar unique identification, as specified by the RBI from time to time.
b) Legal entity identifier: It is a unique identity code assigned to a person by an issuer to identify that person in such derivatives or financial transactions, as specified by the RBI.
c) Trade repository: It is a person who is engaged in the business of collecting, collating, storing, processing or disseminating electronic records or data relating to such derivatives or financial transactions, as specified by the RBI.
• It provides that an order of court, Tribunal or authority which declares the system participant as insolvent or dissolved or wound up, shall not affect any settlement that has become final and irrevocable prior to such order or immediately thereafter.
• It provides that the liquidator or receiver of the central counter party shall not re-open the determination which has become final and irrevocable.
• Further, the liquidator of the central counter party must return the collaterals held in excess, after appropriating the collaterals provided by the system participants towards their settlement etc.
• It provides that the payment obligations and settlement instructions between the central counter party and the system participants shall be determined by such central counter party in accordance with the gross or netting procedure, as the case may be, approved by the Reserve Bank of India (RBI).
• The Bill also introduces a new provision that empowers the RBI to direct system providers of a payment system to ensure protection of funds collected from customers. To this end, system providers must (a) deposit in a separate bank account; and (b) maintain liquid assets of an amount equal to such percentage of the amounts collected by the system provider.
The Payment and Settlement Systems Act, 2007, was enacted to regulate and supervise payment systems in India, which include inter-bank transfers such as the National Electronics Funds Transfer (NEFT) system, the Real Time Gross Settlement (RTGS) System, ATMs, credit cards, etc.
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