Govt Brings PSS Act Amendments into Force, Empowers RBI as Central Payments Regulator [Read Notification]

The Ministry of Finance (Department of Financial Services) issued Notification No. S.O. 2031(E) dated 6th May 2025, announcing 9th May 2025 as the date from which Sections 152 and 153 of the Finance Act, 2017 would come into force.

These provisions form Part XI of the Finance Act, 2017, and relate to amendments to the Payment and Settlement Systems Act, 2007 (PSS Act).

Legal Framework of the Amendments

Section 151 – Commencement Clause

Section 151 stipulates that the provisions of Part XI (amendments to the PSS Act) shall come into force on a date notified by the Central Government. Different provisions can be enforced on different dates.

Section 152 – Substitution of Chapter II in PSS Act

This section substitutes Chapter II of the Payment and Settlement Systems Act, 2007, with a new framework for regulatory governance, titled:

CHAPTER II – DESIGNATED AUTHORITY

Key provisions under the new Chapter II:

1. Designated Authority: The Reserve Bank of India (RBI) is formally designated as the regulator and supervisor for payment systems.
   
   
2. Payments Regulatory Board (PRB): A new body is established within the RBI called the Payments Regulatory Board, which will exercise all powers, functions, and duties under the Act.
   
   
3. Composition of the PRB:
   
   
4. Governor of RBI – Chairperson (ex officio)
5. Deputy Governor in charge of Payment and Settlement Systems – Member (ex officio)
6. One RBI officer nominated by the Central Board – Member (ex officio)
7. Three members nominated by the Central Government – Members
   
   
8. Functioning of the Board: The manner in which the PRB will conduct meetings, make decisions, establish quorum, and handle incidental matters will be governed by rules prescribed under the Act.

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Purpose and Significance of the Notification

The notification activates a major governance reform in India's payment systems landscape by:

• Reorganizing regulatory oversight through a dedicated Payments Regulatory Board.
• Strengthening RBI’s role by institutionalizing its authority through a formal board structure.
• Ensuring representation from both RBI and the Central Government, which balances monetary policy considerations and broader financial system governance.
• Providing a clear statutory framework for decision-making and accountability in the regulation of digital payments, clearing, and settlement systems.
  

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This change directly impacts:

• The Reserve Bank of India (RBI) as the regulatory anchor
• Banks and financial institutions
• Payment system operators (e.g., UPI, NEFT, RTGS, wallet providers)
• Fintech platforms engaged in clearing, settlements, or any form of payment facilitation
• Consumers and merchants, indirectly, through enhanced regulatory oversight and systemic stability

To Read the full text of the Order CLICK HERE

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