The International Financial Services Centres Authority (“IFSCA”) has recently taken a significant step towards enhancing the regulatory framework for payment systems by issuing a consultation paper on the establishment and operation of the "Payments Regulatory Board". This move aligns with IFSCA's authorization under the Payment and Settlement Systems Act, 2007 (“PSS Act”) to exercise powers and perform functions through the establishment of this regulatory board.
Regulatory Objectives and Background
The objective of the consultation paper is to solicit public comments, views, and suggestions on the proposed International Financial Services Authority (Payments Regulatory Board) Regulations, 2020. IFSCA, designated as the regulatory authority for payment systems under the PSS Act, is mandated to establish and operate the Payments Regulatory Board.
Key Provisions of the Proposed Regulations:
Firstly, the envisaged powers and functions of the Payments Regulatory Board encompass critical areas. These include formulating policies for the regulation and supervision of payment systems, establishing standards, authorizing payment systems, determining membership criteria, overseeing compliance with regulations and guidelines, recommending administrative structures, and safeguarding consumer interests and overall system soundness.
Secondly, the proposed regulations empower the Payments Regulatory Board to formulate policies for the comprehensive regulation of payment systems. This extends to electronic, non-electronic, domestic, and cross-border systems that impact transactions in the International Financial Services Centre (“IFSC”). Additionally, the Board is authorized to set standards for payment systems, ensuring a robust framework for their operation.
Moreover, the Board will play a pivotal role in authorizing payment systems, emphasizing a thorough evaluation process. Determining criteria for membership, including aspects of continuation, termination, and rejection of membership, adds an essential layer of scrutiny to the payment systems operating within IFSC.
And, lastly, the oversight of regulations, guidelines, and directions issued by IFSCA falls within the purview of the Payments Regulatory Board. It is tasked with taking necessary actions to ensure compliance, safeguarding and protecting the interests of consumers, and ensuring the overall safety and soundness of payment systems. The proposed regulations empower the Board to recommend an administrative structure that fosters effective regulation and supervision of payment systems. This collaborative approach aims to enhance the efficiency and efficacy of regulatory oversight.
Recent Developments
IFSCA's efforts in strengthening payment systems regulation extend beyond the consultation paper. Recently, the IFSCA notified the IFSCA (Payment Services) Regulations, focusing on the registration and regulation of Payment Services Providers within the IFSCA. These regulations include governance and risk management norms, marking a significant stride in aligning payment services with regulatory standards.
Our Take
IFSCA's consultation paper on the proposed Payments Regulatory Board Regulations signifies a strategic move towards fortifying the regulatory environment for payment systems within the IFSC. By seeking public input, the regulatory authority demonstrates a commitment to transparency and inclusivity. The envisaged powers and functions of the Payments Regulatory Board cover a spectrum of crucial areas, emphasizing policy formulation, compliance oversight, and consumer protection. The proposed regulations, coupled with recent developments in payment services regulations, underscore IFSCA's proactive approach to fostering a secure, efficient, and transparent financial ecosystem within the International Financial Services Centre.
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