File Content -
DPSS.CO.OD. No. 1082/06.08.005 /2016-17 October 20 , 2016
Authorised Payment system operators / banks
Framework for imposing monetary penalty on Authorised Payment Systems
Operators / banks under Payment and Settlement Systems Act, 2007
The Payment and Settlement Systems Act, 2007 (PSS Act) has designated the
Reserve Bank of India (Reserve Bank) as the authority for regulation and supervision
of payment systems. Under the said Act, certain powers have been conferred upon
the Reserve Bank.
2. Section 30 of the PSS Act deals with ‘Power of Reserve Bank to impose
fines’. In terms of this section, certain powers have been conferred upon the Reserve
Bank to impose penalties /fines for certain contraventions /offences more particularly
described in section 26 (2) and 26 (6) of the PSS Act .
3. Section 31 of the PSS Act deals with ‘Power to compound offences’. Subject
to the provisions of this section, power has been conferred upon the Reserve Bank
to compound contraventions /offences committed by the ent ity.
4. Now, it has been decided to put in place a framework for imposition of
penalty /fine under section 30 of the PSS Act and compounding of
contraventions /offences under section 31 of the PSS Act. The details of the
framework are as under:
(i) Nature of offences:
This framework for imposition of penalty /fine/compounding, inter alia, includes the
following types of contraventions /offences that would be considered for levy of
penalty/ fine/compounding, as the case may be, in payment systems;
• Contravention of provisions of the Act .
• Non -compliance of directions or order made there under .
• Violations of terms and conditions of authorisation.
(ii) Compounding: ‘Compounding ’ is a voluntary process . The
contravener may apply for the compounding of an offence by way of submitting an
application as per the Annex I . The application for compounding of
contravention/violation may be submitted to the Chief General Manager, Department
of Payment and Settlement Systems, 14
th floor, Central Office Building, SBS Road,
Fort, Mumbai 400001. The application would be considered provided it is complete in
all respects and the applicant admits to the contravention.
(iii) Operational procedure to be followed: The Reserve Bank will follow
the following procedure before imposing the penalty/fine or compounding of the
offence on the payment system operators / banks (entity/ies);
(a) Issue of letter to the entity calling for explanation citing the offence.
(b) Based on the explanation and information/evidence submitted by the enti ty,
t he Reserve Bank will examine whether the contravention/ offences can be
considered for compounding or levy of penalt y/fine.
(c) Issue of show cause notice for imposing penalty/fine/compounding, in case
Reserve Bank is not satisfied by the explanation.
(d) P ersonal hearing to the entity to be given, if requested in writing, before taking
any penal action.
(e) Imposition of penalty /fine or compounding of contravention/ offences.
(iv) Amount of Penalty /fine: The amount of penalty /fine for the various
payment system operators / banks would be based on the nature of
contravention/ offences with a minimum penalty of
` 5 lakh. Where the
contravention/violation is not quantifiable, a penalty of minimum
` 5 lakh with a
` 1 crore would be levied.
(v) Disclosure: The entities, on whom penalty /fine has been levied, shall
disclose the penalties /fines in their Annual Financial Statements for the year in which
the penalty is levied. Reserve Bank shall also make the penalty levied public by
disclosing the same on its website.
(vi) Method of payment of penalty /fine: In respect of the entities
maintaining current accounts with the Reserve Bank, the Reserve Bank will directly
debit their current account (after obtaining a mandate to that effect). The entities
which are not maintaining current account with Reserve Bank, would deposit the
amount in the designated account of the RBI within one week of the issue of written
(vii) Non-payment of penal ty/fine : In the event of non- payment of penalty /fine ,
the provisions of Section 8 of the PSS Act would be applicable and necessary action
under PSS Act would be initiated accordingly.
5 . These directions are issued by the Reserve Bank, in exercise of the powers
conferred by section 18 of the Payment and Settlement Systems Act, 2007 (Act
(N ilima Ramteke )
Encl- Annex I
On Company Letter head
Format of Application for Compounding of Contravention under Payment and
Settlement Systems Act
1. Name of the applicant (in BLOCK LETTERS) :
2. Full address of the applicant (including Phone/
Fax Number and email id)
3. Brief facts of the case clearly indicating the
nature of the contravention, period and amount
involved in the contravention
4. Any other information relevant to the case :
I / We declare that the particulars given above are true and correct to the best of my /
our knowledge and belief and that I / We am / are willing to accept any direction /
order of the Compounding Authority in connection with compounding of my / our case.
(Signature of the Applicant)