FINANCIAL INCLUSION- NEWS AND VIEWS - NOVEMBER 2018
Last month the RBI went public against the Ministry of Finance. Deputy Governor Viral Acharya gave a blistering speech, On the Importance of Independent Regulatory Institutions – The Case of the Central Bank, batting for greater regulatory control over Public Sector Banks on par with Private Sector Banks, for protecting the RBI balance sheet and not forcing surplus transfer to the fisc, and lastly, against an independent Payments Regulator. The issues raised are valid, and also impact India’s financial inclusion mission. We believe that coordination between the regulator and the government is crucial, even as the two can have opposing views. Further, both must keep in mind that nuanced debates are not possible under media attention.
When it comes to the independent payments regulator as recommended in the draft Payment and Settlement System Bill, 2018, we at the Indicus Centre for Financial Inclusion had earlier recommended making the current Board of Payments and Settlement Systems within the RBI more independent, including non - RBI experts and answering to the RBI Governor (ICFI, January 18, 2017). Creating a separate payments regulator creates coordination issues for RBI’s responsibilities towards financial stability, increases compliance costs and does not necessarily improve efficiency. The dissent note by the RBI to Inter - Ministerial Committee for Finalisation of Amendments of the PSS Act, 2007 made public on October 19, 2018 has set out valid reasons for keeping regulation of payments within the RBI. At the same time the RBI has to be more proactive and transparent in its monitoring and regulation functions than it has been so far.
Last month, the RBI also released the much awaited guidelines for PPI interoperability. Even as we move ahead one step on interoperability, the growing dominance of NPCI is a cause of concern. MasterCard has already reportedly lodged a protest in the US against what is termed a protectionist move by India to promote RuPay (Economic Times, November 2, 2018). In our blog, Emerging Pivotal Role of NPCI, we have set out the way forward in governance and regulatory reform of the NPCI.