Reserve Bank of India tightens rules for imposing penalty under Payment Systems Act; Know the full story
RBI: The Reserve Bank of India has the power to impose a penalty of up to Rs 10 lakh or twice the amount involved in the case, whichever is higher, in case of violation/default. Earlier, the RBI had the power to impose a penalty of up to Rs 5 lakh. This amount was increased after the enactment of the Public Trust (Amendment of Provisions) Act, 2023, which came into force on January 22, 2024.

On Thursday, the Reserve Bank of India tightened the norms for monetary penalty and compounding offenses under the Payment and Settlement Systems Act to rationalize and consolidate the enforcement action of the central bank. Under the revised framework, operating a payment system without authorization for payment system operators and banks, failing to disclose restricted information, and paying the penalty imposed by the Reserve Bank within the prescribed period, comes under the category of an offense under the Payment and Settlement Systems Act (PSS Act).
Under the guideline, in default/violation, a penalty of at least Rs 10 lakh or twice the value involved in such case, whatever is higher, can be imposed by the Reserve Bank. Previously, a penalty of at least Rs 5 lakh could be imposed by the RBI. This amount was increased after the enactment of the Public Trust (Amendment of Provisions) Act, 2023, which came into force on January 22, 2024.
In cases where such violation or default continues, an additional penalty of up to Rs 25,000 can also be imposed for every day after the first penalty. This penalty can be imposed as long as the violation or default continues. It states that the PSS Act empowers the Reserve Bank officer to settle cases related to compoundable violations. These offenses should not be such that provide for imprisonment or jail and fine. The Reserve Bank of India said that enforcement action will be taken in the form of imposing monetary penalties or reducing the offenses only to material violations. The Act also provides for the procedure for imposing monetary penalties and determining the amount of the penalty.