The digital payments industry may soon get a self-regulator if things go as per plan.

Banking lobby group Indian Banks’ Association (IBA) and its payment industry counterpart, Payment Council of India (PCI), are in talks to set up a non-profit joint venture that will regulate the digital payments ecosystem, according to three people aware of the discussions.

This will be under the Reserve Bank of India’s newly issued Self-Regulatory Organization (SRO) framework for Payment System Operators.

Members from both the banking and the payments industry are likely to manage the proposed entity, the people said.

“PCI is in talks with IBA to jointly apply for an SRO licence, as a JV with the latter will bring more pedigree to the application,” said one official. “It’s still early days as they will have to seek clarity on the partnership from the banking regulator RBI.”

According to another person directly aware of the talks, a formal discussion between PCI and IBA to finalize the proposal could be organized this month. The final proposal will have to be submitted to the Department of Payments and Settlement Systems of the RBI.

The joint application is due to the growing interconnectedness of the banking and payments industry, to ensure checks and balances, and to negate any conflict of interest in the enforcement of specific regulations.

IBA and PCI did not respond to ET’s emails till press time Tuesday.

PCI is an industry body which represents the interests of all leading payment systems and settlement providers such as Paytm, Google Pay, PayU among others.

Liaison mandate

The new SRO for payment system operators (PSOs), as envisaged by the central bank, will broadly liaison between the industry, government and regulators to streamline policy decisions, improve communication, enforce standards and resolve disputes.

The one being planned by IBA and PCI would, however, have specific objectives.

These will include ensuring compliance among payment gateways (PGs) and payment aggregators (PAs) under the new licence regime of RBI, according to a second person.

RBI’s new licence regulations, released earlier this year, mandate PAs and PGs to have a prescribed minimum net worth and infrastructure capabilities to be classified as regulated entities.

The SRO may also be asked to smoothen the backend integration of New Umbrella Entities (NUE) with the existing systems of the National Payments Corporation of India, as the central bank wants new retail settlement systems to be interoperable, the source added.

ET has reported previously that State Bank of India, Tata Group and Reliance Jio are vying for NUE licences to set up a rival body to the NPCI.

“The RBI wants the SRO to act more as a coordination and synchronization body which will manage synergies between all stakeholders,” the person said. “The SRO could be made to co-ordinate with NPCI and the NUE players, and also the whole compliance for payment aggregators and payment gateways.”

SROs for self-governance of the burgeoning payments ecosystem has been a long-stated objective of the central bank. The final framework for potential participants was released in October. The RBI said the proposed SRO can only have regulated banks or non-banks as members. It can, however, be a group or an association of payment system operators as well.

“As the payment ecosystem matures and the number of payments systems proliferate, it becomes necessary, in the interest of optimal use of regulatory resources, that the payments industry develop standards in respect of system security, pricing practices, customer protection measures, grievance redressal mechanisms, etc,” according to the central bank’s framework document released last month.

“While self-regulation would release regulatory resources that can be better focused on issues of systemic importance, it would, by virtue of being developed by the industry itself, be more appropriate and encourage better compliance,” RBI said.





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