RBI Guv heads new payments regulatory body as govt gets more say over digital payments
The new structure dilutes the RBI's control over India's booming digital payments sector, which had publicly opposed the arrangement seven years ago.
Reserve Bank of India Governor Sanjay Malhotra will chair a new Payments Regulatory Board alongside five other members—two from the central bank and three government appointees.
The board, which began operations in May following a government notification, includes Deputy Governor Shirish Chandra Murmu and Executive Director Kesavan Ramachandran from the RBI side.
The government's three seats are represented by officials from the Department of Financial Services and the Ministry of Electronics and Information Technology, along with Aruna Sundararajan, a retired civil servant with technology policy experience.
The new structure dilutes the RBI's control over India's booming digital payments sector, which had publicly opposed the arrangement seven years ago. It replaces the Board for Regulation and Supervision of Payment and Settlement Systems, an internal RBI committee that previously had full authority over the sector.
The change gives the central government direct voting power over an ecosystem processing billions of transactions monthly and managing trillions of rupees in digital payments through systems like the Unified Payments Interface.
The showdown dates back to 2018, when the government formed an inter-ministerial committee to propose amendments to the Payment and Settlement Systems Act. That panel recommended creating an independent regulator outside the RBI's structure—a proposal that prompted the central bank to issue a rare public "Dissent Note" in October 2018.
In its dissent, the RBI argued that payments oversight must remain within the central bank. "The Payments Regulatory Board must remain with the Reserve Bank and be headed by the Governor," the note stated, proposing instead that any board include equal representation from government and RBI, with a tie-breaking vote for the governor.
The new board can also invite outside experts in payments, information technology, and law to meetings, with the RBI's chief legal adviser attending as a permanent invitee.
This comes as payments startups and companies are pushing hard for the reinstatement of the merchant discount rate (MDR) on high-volume digital transactions, arguing it's becoming economically unsustainable.
The Payments Council of India has formally asked Prime Minister Narendra Modi to allow a 0.3% MDR on UPI transactions for large merchants, citing shrinking government subsidies. The Startup Policy Forum has backed the proposal, suggesting a two-tier system with zero fees for small merchants but charges for big ones.
However, in June, the Centre dismissed rumours about MDR’s immediate return. A month later, in July, the RBI Governor warned the “free UPI” model may not be sustainable, especially with incentive budgets getting slashed.
Edited by Kanishk Singh