Ratan Watal Committee Current Affairs
The 11-member committee was notified in September 2016 by the Union Finance Ministry to review existing payment systems in country and recommend appropriate measures for encouraging Digital Payments.
What is the issue?
One of the committee’s terms of reference was to study and recommend changes in the regulatory mechanism under various acts such as the RBI Act, Payments and Settlement Act, and the Information Technology Act among others. Based on it, the committee had recommended making regulation of retail payments independent from the function of RBI to give digital payments boost. It had called for establishing separate Payments Regulatory Board (PRB) as an independent body for retail payments and suggested that RBI’s regulation must be kept only for SIPS (systemically important payment system).
What RBI says?
According to the global practice both the SIPS and retail payment systems are under the central bank for a variety of reasons including issues of inter-connectivity between the systems and the role of the central bank as the lender of last resort (LOLR). RBI has mooted a monetary-policy-committee-style structure for the PRB, where outcomes are decided independently, but implementation remains with the banking regulator.
The Committee on Digital Payments headed by Ratan P. Watal has submitted its final report to the Union Finance Ministry.
It was 11-member committee notified in August 2016 by the Finance Ministry. It was tasked to review existing payment systems in the country and recommend appropriate measures for encouraging Digital Payments.
It was having representatives from Reserve Bank of India (RBI), Unique Identification Authority of India (UIDAI), tax department and various industry bodies in the payments space.
- The Committee has recommended medium term strategy for accelerating growth of Digital Payments in India.
- The strategy must be backed with regulatory regime which is conducive to bridging the Digital divide by promoting competition, interoperability and open access in payments.
- It also recommends inclusion of financially and socially excluded groups and assimilation of emerging technologies in the market.
- It calls for need of safeguarding security of Digital Transactions and providing level playing to all stakeholders and new players who will enter this new transaction space.
- It has suggested inter-operability of payments system between banks and non-banks, up-gradation of digital payment infrastructure and institutions.
- It also recommends a framework to reward innovations for leading efforts in enabling digital payments.
- Greater use of Aadhaar and mobile numbers for making digital payments as easy as cash.
- Called for inter-operable payments between bank and non-banks as well as within non-banks.
- Proposed to make regulation of payments independent from the function of central banking to give the entire digital payments boost.
- Give Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) independent statutory status within overall structure of RBI.
- Called for amendments to the Payments and Settlement Systems Act, 2007 to provide BPSS explicit mandate for competition and innovation, consumer protection, open access and interoperability, regulations on systemic risks and data protection.
- Operations of payment systems like National Electronic Fund Transafer (NEFT) and Real Time Gross Settlement (RTGS) can be outsourced after a cost benefit analysis.