The Reserve Bank of India on Friday opposed a suggestion by the central government’s inter-ministerial committee to set up an independent regulator for payment systems. The central bank rejected the recommendation in a dissent note, saying that the move will lead to dual regulation.

All systems, except stock exchanges, carrying out either clearing or settlement or payment operations or all of them are regarded as payment systems. In September, the inter-ministerial panel was tasked with finalising amendments to the Payment and Settlement Systems Act, 2007, to strengthen competition, consumer protection, resilience and systemic stability in the payment sector. The seven-member committee, headed by Department of Economic Affairs Secretary Subhash Chandra Garga, had made the recommendation in its draft report.

The RBI, however, said that the payment systems regulator has to be under its purview as there is no evidence to prove that the current system was inefficient. “Payment systems are a sub-set of currency which is regulated by the RBI,” the central bank’s statement said. “The overarching impact of monetary policy on payment and settlement systems and vice versa provides support for regulation of payment systems to be with the monetary authority.”

The bank also said that dual regulation “will not be desirable”. “In India, the payment system is bank-dominated,” the RBI said. “Regulation of the banking systems and payment system by the same regulator provides synergy and inspires public confidence in the payment instruments.”

The dissent note stressed that the Payments Regulatory Board must be within the RBI and headed by its governor. “It may comprise three members nominated by the government and RBI respectively, with a casting vote for the governor to ensure smooth operations of the Board,” it added.