Board for Payment and Settlement Systems

The Board for Regulation and Supervision of Payment and Settlement Systems (often abbreviated BPSS) was a regulatory body under the Reserve Bank of India (RBI) tasked with overseeing payment systems in India. Its functions, legal framework, and eventual replacement are key to understanding the evolution of India’s payments infrastructure.

Background and Legal Foundation

The BPSS was constituted under the Payment and Settlement Systems Act, 2007, which provided the RBI with powers to regulate and supervise payment systems in India. The 2007 Act envisaged a regulatory framework where the central bank could lay down standards, procedures, and licensing requirements for payment systems.
As part of the RBI’s Central Board of Directors, BPSS functioned to oversee the safety, soundness, efficiency, and reliability of payment and settlement systems across India.

Functions and Powers

Under its mandate, the BPSS had multiple roles:

• Framing regulations and guidelines for payment systems (both retail and large-value systems)
• Supervising entities operating payment systems
• Overseeing clearinghouses, settlement systems, and infrastructure providers
• Ensuring risk management standards, operational resilience, and interoperability
• Monitoring systemic stability in the payments domain

BPSS thus acted as a regulator within the RBI, charged with integrating policy, technical, and operational oversight of India’s payments ecosystem.

Challenges and Criticism

Over time, several criticisms emerged regarding the BPSS structure:

1. Lack of independence: Since BPSS was part of RBI’s internal framework (a sub-committee of the RBI Central Board), it was often argued that it could not act fully impartially—especially when the RBI itself operated some payment systems (such as RTGS and NEFT).
2. Conflict of interest: Because RBI had both operator and regulator roles in many payment systems, critics pointed out a structural conflict. Payment regulation often required objective oversight even over systems run by the central bank itself.
3. Limited stakeholder representation: The BPSS did not include government or other stakeholder nominees explicitly. This constrained broader representation in decisions relating to payment systems.
4. Scaling and innovation pressures: With rapid growth in digital payments, fintechs, and new technologies, the BPSS structure was sometimes viewed as unable to respond flexibly or swiftly to innovation and risk in a competitive ecosystem.

These issues contributed to proposals for reforming India’s payments regulation architecture.

Replacement by Payments Regulatory Board (PRB)

In 2025, India replaced the BPSS with a new body called the Payments Regulatory Board (PRB), following amendments to the PSS Act.
Key changes in structure and functioning include:

• Inclusion of government nominees: The PRB includes not only RBI officials (Governor as Chair, Deputy Governor, etc.) but also three nominees from the Central Government (e.g. Secretaries of relevant ministries).
• Decision-making rules: Board decisions are taken by majority vote among members present and voting; in case of a tie, the Chair (or Deputy Governor) has a casting vote.
• Greater coordination with policy: With government participation, the PRB aims to align payments regulation more closely with national digital and financial inclusion policies.
• Retained RBI oversight: Despite reforms, the PRB remains under RBI’s institutional umbrella, and many technical and operational functions continue within the RBI’s Department of Payments and Settlement Systems (DPSS).

Thus, while the BPSS ceased to exist, its functions transferred to the PRB, which seeks to bring more inclusive oversight and updated governance to India’s payments framework.

Significance in India’s Payment Ecosystem

The BPSS—and now PRB—has been central to India’s transformation in digital payments. Some key points of importance:

• Regulatory anchor: It sets the standards and rules under which mechanisms like RTGS, NEFT, UPI, and other clearing/settlement systems must operate.
• Systemic stability: Payment systems are critical financial infrastructures; oversight is necessary to mitigate operational, liquidity, and credit risks.
• Promoting interoperability and innovation: The board helps chart pathways for integrating new payment technologies, opening access, and ensuring competition.
• Policy alignment: With government inputs, the PRB can better coordinate with national goals like financial inclusion, digital India, and cybersecurity in payments.