1. (1) This Act may be called the Payment and Settlement Systems Act, 2007.

(2) It extends to the whole of India.

(3) It shall come into force on such date as the Central Government may, by
notification in the Official Gazette, appoint and different dates may be appointed for different provisions of this Act, and any reference to the commencement in any such provision of this Act shall be construed as a reference to the commencement of that provision.

(i) a bank included in the Second Schedule to the Reserve Bank of
India Act, 1934;

(ii) a post office savings bank, -

(iii) a banking company as defined in clause (c) of section 5 of the
Banking Regulation Act, 1949;

(b) "derivative" means an instrument, to be settled at a future date, whose value is derived from change in interest rate, foreign exchange rate, credit rating or credit index, price of securities (also called "underlying"), or any other underlying or a combination of more than one of them and includes interest rate swaps, forward rate agreements, foreign currency swaps, foreign currency rupee swaps, foreign currency options, foreign currency
rupee options or any other instrument, as may be specified by the Reserve Bank from time to time;

(c) "electronic funds transfer" means any transfer of funds which is initiated by a person by way of instruction, authorisation or order to a bank to debit
or credit an account maintained with that bank through electronic means and includes point of sale transfers, automated teller machine transactions,
direct deposits or withdrawal of funds, transfers initiated by telephone, internet and card payment;

(d) "gross settlement system" means a payment system in which each settlement of funds or securities occurs on the basis of separate or individual instructions;

(e) "netting" means the determination by the system provider of the amount of money
or securities, due or payable or deliverable, as a result of setting off or adjusting, the payment obligations or delivery obligations among the system participants, including the claims and obligations arising out of the termination by the system provider, on the insolvency or dissolution or winding up of any system participant or such other
circumstances as the system provider may specify in its rules or regulations or byelaws
(by whatever name called), of the transactions admitted for settlement at a future date so that only a net claim be demanded or a net obligation be owned;

(f) "notification" means a notification published in the Official Gazette;

(g) "payment instruction" means any instrument, authorisation or order in any form, including electronic means, to effect a payment,-

(i) by a person to a system participant; or

(ii) by a system participant to another system participant;

(h) "payment obligation" means an indebtedness that is owned by one system participant to another system participant as a result of clearing or settlement of one or
more payment instructions relating to funds, securities or foreign exchange or
derivatives or other transactions;

(i) "payment system" means a system that enables payment to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them, but does not include a stock exchange;

Explanation.- For the purposes of this clause, "payment system" includes the systems
enabling credit card operations, debit card operations, smart card operations, money transfer operations or similar operations;

(j) "prescribed" means prescribed by regulations made under this Act;

(k) "regulation" means a regulation made under this Act;

4. (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) 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.

(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) 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) 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) 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.

11. (1) No system provider shall cause any change in the system which would affect the
structure or the operation of the payment system without -

(a) the prior approval of the Reserve Bank; and

(b) giving notice of not less than thirty days to the system participants after the
approval of the Reserve Bank:

Provided that in the interest of monetary policy of the country or in public interest, the Reserve Bank may permit the system provider to make any changes in a payment system without giving notice to the system participants under clause (b) or requiring
the system provider to give notice for a period longer than thirty days.

(2) Where the Reserve Bank has any objection, to the proposed change for any reason, it shall communicate such objection to the systems provider within two
weeks of receipt of the intimation of the proposed changes from the system provider.

(3) The system provider shall, within a period of two weeks of the receipt of the objections from the Reserve Bank forward his comments to the Reserve Bank and the proposed changes may be effected only after the receipt of approval from the Reserve Bank.

15. (1) Subject to the provisions of sub-section (2), any document or information obtained by the Reserve Bank under sections 12 to 14 (both inclusive) shall be kept confidential.

(2) Notwithstanding anything contained in sub-section (1), the Reserve Bank may disclose any document or information obtained by it under sections 12 to 14 (both inclusive) to any person to whom the disclosure of such document or information is
considered necessary for protecting the integrity, effectiveness or security of the
payment system, or in the interest of banking or monetary policy or the operation of
the payment systems generally or in the public interest.

17. Where the Reserve Bank is of the opinion that, -

(a) a payment system or a system participant is engaging in, or is about to engage in, any act, omission or course of conduct that results, or is likely to result, in systemic risk being inadequately controlled; or
Power to issue directions.

(b) any action under clause (a) is likely to affect the payment system, the monetary policy or the credit policy of the country,

the Reserve Bank may issue directions in writing to such payment system or system
participant requiring it, within such time as the Reserve Bank may specify -

(i) to cease and desist from engaging in the act, omission or course of conduct or to ensure the system participants to cease and desist from the act, omission or course of conduct; or

(ii) to perform such acts as may be necessary, in the opinion of the Reserve Bank, to remedy the situation.

(4) Where a system participant is declared by a court of competent jurisdiction as insolvent or is dissolved or wound up, then notwithstanding anything contained in the Companies Act, 1956 or the Banking Regulation Act, 1949 or any other law for the
time being in force, the order of adjudication or dissolution or winding up, as the case
may be, shall not affect any settlement that has become final and irrevocable and the
right of the system provider to appropriate any collaterals contributed by the system
participant towards its settlement or other obligations in accordance with the rules, regulations or bye-laws of such system provider.

Explanation. - For the removal of doubts, it is hereby declared that the settlement, whether gross or net, referred to in this section is final and irrevocable as soon as the money, securities, foreign exchange or derivatives or other transactions payable as a
result of such settlement is determined, whether or not such money, securities or
foreign exchange or derivatives or other transactions is actually paid.

24. (1) The system provider shall make provision in its rules or regulations for creation
of panel consisting of not less than three system participants other than the system
participants who are parties to the dispute to decide the disputes between system participants in respect of any matter connected with the operation of the payment
system.

(2) Where any dispute in respect of any matter connected with the operation of the payment system arises between two or more system participants, the system provider shall refer the dispute to the panel referred to in sub-section (1).

(3) Where any dispute arises between any system participant and the system provider or between system providers or where any of the system participants is not satisfied with the decision of the panel referred to in sub-section (1), the dispute shall be referred to the Reserve Bank.

(4) The dispute referred to the Reserve Bank for adjudication under sub-section (3)
shall be disposed of by an officer of the Reserve Bank generally or specially authorized in this behalf and the decision of the Reserve Bank shall be final and binding.

(5) Where a dispute arises between the Reserve Bank, while acting in its capacity
as system provider or as system participant, and another system provider or system participant, the matter shall be referred to the Central Government which may
authorise an officer not below the rank of Joint Secretary for settlement of the dispute and the decision of such officer shall be final.

25. (1) Where an electronic funds transfer initiated by a person from an account maintained by him cannot be executed on the ground that the amount of money
standing to the credit of that account is insufficient to honour the transfer instruction
or that it exceeds the amount arranged to be paid from that account by an agreement
made with a bank, such person shall be deemed to have committed an offence and
shall, without prejudice to any other provisions of this Act, be punished with imprisonment for a term which may extent to two years, or with fine which may extend to twice the amount of the electronic funds transfer, or with both:

Provided that nothing contained in this section shall apply unless -

(a) the electronic funds transfer was initiated for payment of any amount of money to another person for the discharge, in whole or in part, of any debt or other liability;

(b) the electronic funds transfer was initiated in accordance with the relevant procedural guidelines issued by the system provider;

(c) the beneficiary makes a demand for the payment of the said amount of money by giving a notice in writing to the person initiating the electronic funds
transfer within thirty days of the receipt of information by him from the bank concerned regarding the dishonour of the electronic funds transfer; and

(d) the person initiating the electronic funds transfer fails to make the payment of the said money to the beneficiary within fifteen days of the receipt
of the said notice.

(2) It shall be presumed, unless the contrary is proved, that the electronic funds transfer was initiated for the discharge, in whole or in part, of any debt or other liability.

(3) It shall not be a defence in a prosecution for an offence under sub-section (1) that the person, who initiated the electronic funds transfer through an instruction, authorisation, order or agreement, did not have reason to believe at
the time of such instruction, authorisation, order or agreement that the credit of his account is insufficient to effect the electronic funds transfer.

(4) The Court shall, in respect of every proceeding under this section, on production of a communication from the bank denoting the dishonour of
electronic funds transfer, presume the fact of dishonour of such electronic funds transfer, unless and until such fact is disproved.

27. (1) Where a person committing a contravention of any of the provisions of this Act or
any regulation, direction or order made thereunder is a company, every person who, at the
time of the contravention, was in-charge of, and was responsible to, the company for the
conduct of business of the company, as well as the company, shall be guilty of the
contravention and shall be liable to be proceeded against and punished accordingly :

Provided that nothing contained in this sub-section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention.

(2) Notwithstanding anything contained in sub-section (1), where a contravention of
any of the provisions of this Act or of any regulation, direction or order made thereunder has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of any director, manager, secretary or other officer of the company, such director, manager,
secretary or other officer shall also be deemed to be guilty of the contravention and shall be
liable to be proceeded against and punished accordingly.

Explanation. - For the purposes of this section,-

(a) "company" means any body corporate and includes a firm or other association of individuals; and

(b) "director", in relation to a firm, means a partner in the firm.

28. (1) No court shall take cognizance of an offence punishable under this Act except upon a complaint in writing made by an officer of the Reserve Bank generally or specially authorised
by it in writing in this behalf, and no court, lower than that of a Metropolitan Magistrate or a
Judicial Magistrate of the first class shall try any such offence:

Provided that the Court may take cognizance of an offence punishable under section 25
upon a complaint in writing made by the person aggrieved by the dishonour of the electronic funds transfer.

30. (1) Notwithstanding anything contained in section 26, if a contravention or default of the
nature referred to in sub-section (2) or sub-section (6) of section 26, as the case may be, the
Reserve Bank may impose on the person contravening or committing default a penalty not
exceeding five lakh rupees or twice the amount involved in such contravention or default
where such amount is quantifiable, whichever is more, and where such contravention or
default is a continuing one, a further penalty which may extend to twenty-five thousand
rupees for every day after the first during which the contravention or default continues.

(2) For the purpose of imposing penalty under sub-section (1), the Reserve Bank shall
serve a notice on the defaulter requiring him to show cause why the amount specified in the
notice should not be imposed as a penalty and a reasonable opportunity of being heard shall
also be given to such defaulter.

(3) Any penalty imposed by the Reserve Bank under this section shall be payable within
a period of thirty days from the date on which notice issued by the Reserve Bank demanding
payment of the sum is served on the defaulter and, in the event of failure of the person to pay
the sum within such period, may be recovered on a direction made by the principal civil court
having jurisdiction in the area where the registered office of the defaulter company or the
official business of the person is situated:

Provided that no such direction shall be made, except on an application made by an officer of
the Reserve Bank authorised by it in this behalf.

(4) The Reserve Bank may recover the amount of penalty by debiting the current account, if any, of the defaulter or by liquidating the securities held to the credit of the defaulter or in accordance with the provisions of this Act.

(5) The court which makes a direction under sub-section (3) shall issue a certificate
specifying the sum payable by the defaulter and every such certificate shall be enforceable in
the same manner as it were a decree made by the court in a civil suit.

(6) Where any complaint has been filed against any person in any court in respect of the
contravention or default of the nature referred to in sub-section (2), or, as the case may be,
sub-section (4) of section 26, then, no proceeding for the imposition of any penalty on the
person shall be taken under this section.

31. (1) Notwithstanding anything contained in the Code of Criminal Procedure, 2 of 1973, any
offence punishable under this Act for any contravention, not being an offence punishable with
imprisonment only, or with imprisonment and also with fine, may, on receipt of an application
from the person committing such contravention either before or after the institution of any
proceeding, be compounded by an officer of the Reserve Bank duly authorised by it in this
behalf.

(2) Where a contravention has been compounded under sub-section (1), no proceeding or
further proceeding, as the case may be, shall be initiated or continued, as the case may be,
against the person committing such contravention under that section, in respect of the
contravention so compounded.

37. (1) If any difficulty arises in giving effect to the provisions of this Act, the Central
Government may, by order published in the Official Gazette, make such provision is
not inconsistent with the provisions of this Act as appear to it to be necessary or expedient for removing the difficulty:

Provided that no order shall be made under this section after the expiry of a period of two years from the commencement of this Act.

(2) Every order made under this section shall be laid, as soon as may be after it is made, before each House of Parliament.

38. (1) The Reserve Bank may, by notification, make regulations consistent with this Act to carry out the provisions of this Act.

(2) In particular, and without prejudice to the generality of the foregoing provision, such regulations may provide for all or any of the following matters, namely:-

Power of Reserve Bank to make
regulations.

(a) the powers and functions of the Committee constituted under sub-section

(2), the time and venue of its meetings and the procedure to be followed by it at its meetings (including the quorum at such meetings) under sub-section (4) of section
3;

(b) the form and manner in which an application for authorisation for
commencing or carrying on a payment system shall be made and the fees which shall accompany such application under sub-section (2) of section 5;

(c) the form in which an authorisation to operate a payment system under this
Act shall be issued under sub-section (2) of section 7;

(d) the format of payment instructions and other matters relating to determination of standards to be complied with by the payment systems under
sub-section (1) of section 10;

(e) the intervals, at which and the form and manner in which the information or returns required by the Reserve Bank shall be furnished under section 12;

(f) such other matters as are required to be, or may be, prescribed.

(2) Any regulation made under this section shall have effect from such earlier or later date (nor earlier than the date of commencement of this Act) as may be specified in the regulation.

(3) Every regulation shall, as soon as may be after it is made by the Reserve Bank, be forwarded to the Central Government and that Central Government shall cause a copy of the same to be laid before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the regulation, or both Houses agree that the regulation should not be made, the regulation shall, thereafter, have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that regulation.