Revolutionizing Penalties and Power: Jan Vishwas Amendments and its Impact on Payment

Guneet Mayall , Shreyika Walia

September 22, 2023

Revolutionizing Penalties and Power: Jan Vishwas Amendments and its Impact on Payment Systems Act

The Jan Vishwas (Amendment of Provisions) Act, 2023 (“JV Act”) which received the assent from the President of India on 11th August 2023 amends 42 acts with an intention to decriminalize and rationalize minor offences and aims to “enhance trust- based governance for ease of living and doing business.”. The JV Act has a notable impact on crucial regulations including without limitation, the Payment and Settlement Systems Act, 2007 (“PSS Act”). The JV Act has sought to bring about substantial modifications pertaining to penalties and regulatory powers wielded by the Reserve Bank of India (“RBI”).

With the rise and domination of the digital realm, the PSS Act intends to strike a balance between innovation and regulation by providing a secure and reliable digital payment system. The ever-increasing volume of financial transactions necessitated a comprehensive legal framework which led to the enactment of the PSS Act and provided for vigilant regulatory supervision.

The establishment of the payment and settlement systems has reformed online transactions, attaining a more efficient, streamlined and swift mechanism. The PSS Act encompasses stringent regulatory measures which are essential to curb potential fraud and cyber risks that are intrinsic in the digital realm.

The PSS Act at its core fosters an equitable playing field and does not impose restrictions on international payment systems seeking authorization to commence operations in India. RBI is conferred with the regulatory power to lay down policies relating to the regulation of payment systems including domestic and international payment systems affecting domestic transactions. This approach underscores and facilitates cross-border collaborations and investment in India’s financial technology sector.

The amendments brought forth in the JV Act are tailored in accordance with the evolving digital landscape imposing hefty penalties on people who fail to comply with the provisions of the PSS Act. The amendments sought are summarized in the table below along with an analysis of the modifications.

Amended Section Provision (Before) Provision (After) Analysis
26(3)Fine of INR 10 (ten) Lakhs imposed on any person who fails to produce relevant documents which is his/her duty to furnish as per the PSS Act and INR 25,000 (twenty-five thousand) per day in case of continuing default.Penalty shall be imposed as per the provisions of Section 30 of the PSS Act.This amendment replaces the fine with penalty. The penalty imposed aligns with the broad penalty structure outlined in Section 30 of the PSS Act.
26(6)Fine of INR 10 (ten) Lakhs imposed if any provision of the PSS Act is contravened or failure to comply with any other requirement under the PSS Act and INR 25,000 (twenty-five thousand) per day in case of continuing default.Penalty shall be imposed as per the provisions of Section 30 of the PSS Act.This amendment replaces the fine with penalty. The penalty imposed aligns with the broad penalty structure outlined in Section 30 of the PSS Act.
30 (Marginal Head)“Power of RBI to impose fines“Power of RBI to impose penalties 
30(1)

 Notwithstanding anything contained in Section 26, in case of contravention of Section 26(2) and Section 26(6), RBI may impose a maximum penalty of INR 5 (five) Lakhs or twice the amount involved in such contravention, whichever is more.

In case of continuing default INR 25,000 (twenty-five thousand) per day.

  Notwithstanding anything contained in Section 26, in case of contravention of   Section 26(2), Section 26(3) and Section 26(6), RBI may impose a maximum penalty INR 10 (ten) Lakhs or twice the amount involved in such contravention, whichever is more.

In case of continuing default INR 25,000 (twenty-five thousand) per day.

This section gives an overriding power to RBI for imposing penalties over the penal provisions given under Section 26 of the PSS Act. The amendment brought by JV Act increases the ambit to cover more sections for RBI to use its discretion under this section and also authorizes RBI to impose higher penalties.

 

Conclusion: The amendments introduced by the JV Act fosters uniformity with respect to penalty imposition and simplify the regulatory process, enhancing further compliance. In addition, it also empowers RBI to enforce stricter supervision, reflecting an effort to deter non-compliance of the provisions of the PSS Act. The amendments ensure that the integrity of the payment and settlement systems is maintained and has significantly bolstered the regulatory framework.

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