Chapter III AUTHORISATION OF PAYMENT SYSTEMS

1. (1) No person, other than the Reserve Bank, shall commence or operate a payment system except under and in accordance with an authorisation issued by the Reserve Bank under the provisions of this Act: Provided that nothing contained in this section shall apply to--
   • (a) the continued operation of an existing payment system on commencement of this Act for a period not exceeding six months from such commencement, unless within such period, the operator of such payment system obtains an authorisation under this Act or the application for authorisation made under section 7 of this Act is refused by the Reserve Bank;
   • (b) any person acting as the duly appointed agent of another person to whom the payment is due;
   • (c) a company accepting payments either from its holding company or any of its subsidiary companies or from any other company which is also a subsidiary of the same holding company;
   • (d) any other person whom the Reserve Bank may, after considering the interests of monetary policy or efficient operation of payment systems, the size of any payment system or for any other reason, by notification, exempt from the provisions of this section.
2. (2) The Reserve Bank may, under sub-section (1) of this section, authorise a company or corporation to operate or regulate the existing clearing houses or new clearing houses of banks in order to have a common retail clearing house system for the banks throughout the country: Provided, however, that not less than fifty-one per cent. of the equity of such company or corporation shall be held by public sector banks. "Explanation".--For the purposes of this clause, "public sector banks" shall include a "corresponding new bank", "State Bank of India" and "subsidiary bank" as defined in section 5 of the Banking Regulation Act, 1949 (10 of 1949).

1. (1) Any person desirous of commencing or carrying on a payment system may apply to the Reserve Bank for an authorisation under this Act.
2. (2) An application under sub-section (1) shall be made in such form and in such manner and shall be accompanied by such fees as may be prescribed.

After the receipt of an application under section 5, and before an authorisation is issued under this Act, the Reserve Bank may make such inquiries as it may consider necessary for the purpose of satisfying itself about the genuineness of the particulars furnished by the applicant, his capacity to operate the payment system, the credentials of the participants or for any other reason and when such an inquiry is conducted by any person authorised by it in this behalf, it may require a report from such person in respect of the inquiry.

1. (1) The Reserve Bank may, if satisfied, after any inquiry under section 6 or otherwise, that the application is complete in all respects and that it conforms to the provisions of this Act and the regulations issue an authorisation for operating the payment system under this Act having regard to the following considerations, namely:--
   • (i) the need for the proposed payment system or the services proposed to be undertaken by it;
   • (ii) the technical standards or the design of the proposed payment system;
   • (iii) the terms and conditions of operation of the proposed payment system including any security procedure;
   • (iv) the manner in which transfer of funds may be effected within the payment system;
   • (v) the procedure for netting of payment instructions effecting the payment obligations under the payment system;
   • (vi) the financial status, experience of management and integrity of the applicant;
   • (vii) interests of consumers, including the terms and conditions governing their relationship with payment system providers;
   • (viii) monetary and credit policies; and
   • (ix) such other factors as may be considered relevant by the Reserve Bank.
2. (2) An authorisation issued under sub-section (1) shall be in such form as may be prescribed and shall--
   • (a) state the date on which it takes effect;
   • (b) state the conditions subject to which the authorisation shall be in force;
   • (c) indicate the payment of fees, if any, to be paid for the authorisation to be in force;
   • (d) if it considers necessary, require the applicant to furnish such security for the proper conduct of the payment system under the provisions of this Act;
   • (e) continue to be in force till the authorisation is revoked.
3. (3) Where the Reserve Bank considers that the application for authorisation should be refused, it shall give the applicant a written notice to that effect stating the reasons for the refusal: Provided that no such application shall be refused unless the applicant is given a reasonable opportunity of being heard.
4. (4) Every application for authorisation shall be processed by the Reserve Bank as soon as possible and an endeavour shall be made to dispose of such application within six months from the date of filing of such application.

1. (1) If a system provider,--
   • (i) contravenes any provisions of this Act, or
   • (ii) does not comply with the regulations, or
   • (iii) fails to comply with the orders or directions issued by the designated authority, or
   • (iv) operates the payment system contrary to the conditions subject to which the authorisation was issued, the Reserve Bank may, by order, revoke the authorisation given to such system provider under this Act: Provided that no order of revocation under sub-section (1) shall be made--
   • (i) except after giving the system provider a reasonable opportunity of being heard; and
   • (ii) without prejudice to the direction of the Reserve Bank to the system provider that the operation of the payment system shall not be carried out till the order of revocation is issued.
2. (2) Nothing contained in sub-section (1) shall apply to a case where the Reserve Bank considers it necessary to revoke the authorisation given to a payment system in the interest of the monetary policy of the country or for any other reasons to be specified by it in the order.
3. (3) The order of revocation issued under sub-section (1) shall include necessary provisions to protect and safeguard the interests of persons affected by such order of revocation.
4. (4) Where a system provider becomes insolvent or dissolved or wound up, such system provider shall inform that fact to the Reserve Bank and thereupon the Reserve Bank shall take such steps as deemed necessary to revoke the authorisation issued to such system provider to operate the payment system.

1. (1) Any applicant for an authorisation whose application for the operation of the payment system is refused under sub-section (3) of section 7 or a system provider who is aggrieved by an order of revocation under section 8 may, within thirty days from the date on which the order is communicated to him, appeal to the Central Government.
2. (2) The Central Government shall endeavour to dispose of an appeal under sub-section (1) within a period of three months.
3. (3) The decision of the Central Government on the appeal under sub-section (1) shall be final.