Payment and Settlement Systems Act, 2007 · One-liners

1 Bank \[Sec. 2(1)(a)\]?

Includes (i) a bank in the Second Schedule of the RBI Act, 1934; (ii) a post office savings bank; (iii) a banking company as defined in Sec. 5(c) of the BR Act, 1949; (iv) a co-operative bank as defined in Sec. 5(cci) of the BR Act, 1949; (v) any other bank the RBI may notify.

2 Derivative \[Sec. 2(1)(b)\]?

An instrument settled at a future date whose value is derived from change in interest rate, FX rate, credit rating/credit index, price of securities ("underlying"), or any combination — including interest rate swaps, FRAs, FX swaps, FX-rupee swaps, FX options, FX-rupee options, or any other…

3 Electronic Funds Transfer (EFT) \[Sec. 2(1)(c)\]?

Any transfer of funds initiated by instruction, authorization or order to a bank to debit/credit an account through electronic means — includes POS transfers, ATM transactions, direct deposits/withdrawals, telephone-, internet- and card-payment transfers.

4 Gross Settlement System \[Sec. 2(1)(d)\]?

A payment system in which each settlement of funds or securities occurs on the basis of separate or individual instructions (no bunching, no netting). Example — RTGS.

5 Issuer \[Sec. 2(1)(da)\]?

A person who issues a Legal Entity Identifier (LEI) or such other unique identification, as RBI may specify.

6 Legal Entity Identifier (LEI) \[Sec. 2(1)(db)\]?

A unique identity code assigned to a person by an issuer to identify that person in such derivatives or financial transactions as RBI may specify.

7 Netting \[Sec. 2(1)(e)\]?

Determination by the system provider of the amount of money/securities due, payable or deliverable, by setting off or adjusting payment obligations among system participants — including claims and obligations arising on insolvency, dissolution or winding-up of any participant — so that only a net…

8 Payment Instruction \[Sec. 2(1)(g)\]?

Any instrument, authorization or order, including by electronic means, to effect a payment — (i) by a person to a system participant or (ii) by one system participant to another.

9 Payment Obligation \[Sec. 2(1)(h)\]?

An indebtedness owned by one system participant to another, arising from clearing/settlement of one or more payment instructions for funds, securities, FX, derivatives or other transactions.

10 Payment System \[Sec. 2(1)(i)\]?

A system that enables payment between a payer and beneficiary involving clearing, payment or settlement service — includes credit cards, debit cards, smart cards, money transfer operations and similar systems; excludes a stock exchange.

11 Settlement \[Sec. 2(1)(n)\]?

Settlement of payment instructions — includes settlement of securities, FX, derivatives or other transactions that involve payment obligations.

12 System Participant \[Sec. 2(1)(p)\]?

A bank or any other person participating in a payment system; includes the system provider.

13 Trade Repository \[Sec. 2(1)(r)\]?

A person engaged in the business of collecting, collating, storing, maintaining, processing or disseminating electronic records or data relating to derivatives or financial transactions, as RBI may specify.

14 Governor, RBI — Capacity / Source?

Capacity: Chairperson, ex-officio; Source: Sec. 3(3)(a)

15 Deputy Governor, RBI in-charge of Payment & Settlement Systems — Capacity / Source?

Capacity: Member, ex-officio; Source: Sec. 3(3)(b)

16 One officer of RBI, nominated by the Central Board of RBI — Capacity / Source?

Capacity: Member, ex-officio; Source: Sec. 3(3)(c)

17 Three persons nominated by the Central Government — Capacity / Source?

Capacity: Members; Source: Sec. 3(3)(d)

18 Sec. 5?

Application for authorization — form, manner and fees prescribed by the regulations.

19 Sec. 6?

Inquiry by RBI — scrutiny of the application, additional information, technical assessment.

20 Sec. 7?

Issue of authorization — RBI may, after inquiry, issue authorization if the application conforms to the Act.

21 Apply for authorization — Time limit / Section?

Time limit: No statutory limit on the applicant; RBI endeavours to decide within 6 months; Section: Sec. 5, Sec. 7(4)

22 File appeal against revocation — Time limit / Section?

Time limit: Within 30 days of communication of order; Section: Sec. 9

23 Central Government disposal of appeal — Time limit / Section?

Time limit: Within 3 months (endeavour); Section: Sec. 9

24 Continued operation of existing system (transitional) — Time limit / Section?

Time limit: Up to 6 months from Act commencement; Section: Proviso to Sec. 4(1)

25 Sec. 12 — RBI's power / Operative phrase?

RBI's power: Call for returns / documents / information; Operative phrase: in such intervals, form and manner as RBI may require or prescribe

26 Sec. 13 — RBI's power / Operative phrase?

RBI's power: Right to access any information relating to the operation of any payment system; Operative phrase: all system participants must provide access

27 Sec. 14 — RBI's power / Operative phrase?

RBI's power: Entry and inspection of premises, equipment, computer systems, documents; call upon staff to furnish info; Operative phrase: officer of RBI authorized in writing

28 Sec. 16 — RBI's power / Operative phrase?

RBI's power: Audit and inspection of a payment system or any participant; Operative phrase: general supervisory power

29 Basis — Gross Settlement / Net Settlement?

Gross Settlement: Transaction-by-transaction, on separate instructions; Net Settlement: Multiple transactions are bunched, offset against each other

30 Settlement amount — Gross Settlement / Net Settlement?

Gross Settlement: Full gross value of each transaction; Net Settlement: Only the net differential between parties

31 Settlement time — Gross Settlement / Net Settlement?

Gross Settlement: Continuous / real-time; Net Settlement: At pre-determined settlement cycles

32 Liquidity demand — Gross Settlement / Net Settlement?

Gross Settlement: High — full funding needed for each leg; Net Settlement: Lower — only the net obligation must be funded

33 Counterparty exposure — Gross Settlement / Net Settlement?

Gross Settlement: Minimal — transactions settle one by one; Net Settlement: Builds up between settlement cycles

34 Indian example — Gross Settlement / Net Settlement?

Gross Settlement: RTGS — the only Indian gross-settlement payment system; Net Settlement: NEFT, IMPS, UPI, CTS — all net-settled

35 Effective date & extent?

PSS Act 2007 came into force on August 12, 2008, extends to the whole of India.

36 Designated authority?

RBI under Sec. 3(1); decisions taken through the Payments Regulatory Board (PRB) under PRB Regulations, 2025 (effective May 9, 2025).

37 Authorization?

Mandatory under Sec. 4(1); 51% public-sector equity in retail clearing-house company \[Sec. 4(2)\]; 6-month RBI endeavour to decide \[Sec. 7(4)\].

38 Refusal & appeal?

RBI must give written notice + opportunity of hearing \[Sec. 7(3)\]; appeal to Central Government within 30 days, disposal endeavour 3 months \[Sec. 8, Sec. 9\].

39 System changes?

Prior RBI approval + 30-day notice to participants \[Sec. 11\]; RBI objection window 2 weeks.

40 Charges on electronic modes?

Zero MDR on Sec. 269SU electronic modes (UPI / RuPay) under Sec. 10A.

41 Information & inspection?

Sec.Sec. 12, 13, 14, 16 — returns, access, entry/inspection, audit.

42 Directions?

Sec.Sec. 17-19 — cease & desist + remedial; general policy directions; compliance is mandatory.

43 Settlement & netting?

Sec. 23 — finality and irrevocability; overrides BR Act, Companies Act and IBC 2016; CCP determinations binding.

44 Gross vs. Net?

RTGS = gross; NEFT/IMPS/UPI/CTS = net.

45 Penalties & compounding?

Sec.Sec. 30, 31 — revised framework effective January 30, 2025; Jan Vishwas Act decriminalisations from January 22, 2024.

46 Regulation-making?

Sec. 38 — PSS Regulations 2008 (latest amendment February 10, 2022); PRB Regulations 2025; 30-day parliamentary lay-table.

One-linersPayment and Settlement Systems Act, 2007