With the government pushing ahead on its commitment to a less-cash economy, there will be considerable change in the way Indians transact this year. The Report of the Committee on Digital Payments, chaired by Shri Ratan P. Watal, was submitted in December, setting out a list of recommendations for implementation in the medium term i.e. over the next thirty to ninety days. While the report has called for comments from the public, the main recommendations include making payments regulation independent from the function of central banking by either creating a new payments regulator or making the current Board for Regulation and Supervision of Payment and Settlement Systems within the Reserve Bank of India more independent; updating the Payments and Settlement Systems Act,2007 to include explicit mandate for competition and innovation,open access and interoperability, consumer protection including penalties and independent appeal mechanism, regulations on systemic risks, data protection and security and a process of regulatory governance; various measures to promote digital payments and receipts, upgrading payment systems like RTGS and NEFT to operate on 24x7 basis; allowing non-bank PSPs to directly access payment systems; diversifying ownership of the National Payments Corporation of India (NPCI); enabling interoperability between banks and non-banks as well as within non-banks etc.
As payments banks prepare to begin operations in India this year, a GSMA study notes that “the success of the payments banks hinges on dedicated and innovative commercial players and a regulator willing to maintain an open dialogue with the industry to ensure proportionality as the payments banks go-to-market.” A sustainable business model calls for payments banks using adjacent revenue streams (e.g., digital credit, micro insurance and merchant payments), more proportionate regulations on ongoing capital requirements and continued policy support to bring down both the high direct costs of account acquisition and maintenance.