RBI Tightens Penalty Norms for Payment Systems Law Enforcement Actions

The Reserve Bank of India (RBI) has revised its guidelines for imposing fines and handling offences under the Payment and Settlement Systems Act (PSS Act). This move aims to streamline enforcement actions by the central bank. The updated rules apply to payment system operators and banks, detailing specific violations such as operating without authorisation, sharing prohibited information, and not paying penalties on time.

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Monetary Penalties and Offences

According to the new framework, the RBI can impose a fine of up to Rs 10 lakh or double the amount involved in a violation, whichever is higher. This is applicable when the amount can be quantified. Previously, the maximum penalty was Rs 5 lakh. The increase follows the Jan Vishwas Amendment of Provisions Act, 2023, which took effect on January 22, 2024.

For ongoing violations, an additional penalty of up to Rs 25,000 per day can be levied after the first day of non-compliance. The PSS Act authorises an RBI officer to compound contraventions that do not involve imprisonment as a punishment. The RBI clarified that only significant breaches will lead to monetary penalties or offence compounding.

Enforcement Procedures

The framework outlines procedures for imposing fines and calculating their amounts. It emphasises that only material contraventions will be subject to enforcement actions. This approach aims to ensure that penalties are applied judiciously and effectively.

By tightening these norms, the RBI seeks to enhance compliance among payment system operators and banks. The changes reflect a broader effort to maintain integrity and trust in India's financial systems.