Mumbai: The Reserve Bank of India (RBI) has introduced a revised framework for imposing monetary penalties and compounding offences for digital payment operators under the Payment and Settlement Systems (PSS) Act, 2007. The updated guidelines aim to strengthen compliance and enforcement in the rapidly evolving digital payments ecosystem.
Under the revised framework, penalties can be imposed for violations such as operating a payment system without authorization, failure to furnish required information, non-compliance with RBI directions, and breaches of Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.
Monetary Penalties and Compounding Process
The RBI stated that fines of up to Rs. 10,00,000 or twice the amount involved in the contravention, whichever is higher, may be imposed. Additionally, if the violation continues, a further penalty of Rs. 25,000 per day may be levied for each day the contravention persists.
The framework also outlines a detailed procedure for imposing penalties, including issuing show-cause notices and providing an opportunity for a personal hearing. In some cases, violations can be settled without criminal proceedings through a compounding mechanism.
Entities seeking compounding must submit an application along with the necessary documentation. The compounding amount may be 25% lower than the corresponding monetary penalty and must be paid within 30 days of the order. Failure to comply within the stipulated time may result in further legal proceedings, including criminal action.
Additionally, RBI has mandated that entities disclose monetary penalties in their annual financial statements. The details of enforcement actions will also be published on the central bank’s website to ensure transparency.
Supervision by RBI Committees
A committee of senior RBI officials will oversee penalty imposition and compounding decisions. The central bank specified that:
A committee comprising three Executive Directors will handle cases at the Central Office of the Enforcement Department.
A committee comprising the Regional Director and two senior officers will manage cases at the Regional Office of the Enforcement Department.
A Move to Ensure Secure Digital Payments
The revised framework takes effect immediately, marking a stricter approach to enforcement amid rising scrutiny of India’s payments industry. With the rapid expansion of digital wallets, prepaid payment instruments, and real-time payment systems like UPI, the RBI aims to enhance regulatory supervision and safeguard financial stability.
