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Part 2 - Role of RBI

The Reserve Bank of India (RBI) serves multiple roles in the payment and settlement systems, including regulator, operator, settlement agent, supervisor, and promoter of innovation. It operates key systems like RTGS and NEFT, ensures compliance and safety, and promotes financial inclusion through initiatives like UPI. Additionally, RBI represents India in international forums to enhance the credibility and interoperability of Indian payment systems.

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31 views3 pages

Part 2 - Role of RBI

The Reserve Bank of India (RBI) serves multiple roles in the payment and settlement systems, including regulator, operator, settlement agent, supervisor, and promoter of innovation. It operates key systems like RTGS and NEFT, ensures compliance and safety, and promotes financial inclusion through initiatives like UPI. Additionally, RBI represents India in international forums to enhance the credibility and interoperability of Indian payment systems.

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parvati2717
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📘 Part 2: Role of RBI in Payment and

Settlement Systems

🔹 1. Regulator
The Reserve Bank of India (RBI) is the primary regulator of payment systems in India,
empowered by the Payment and Settlement Systems Act, 2007.

●​ Authorizes Payment System Operators (PSOs)​

●​ Frames guidelines and operational policies​

●​ Ensures systemic safety, efficiency, and security​

Example: RBI authorizes NPCI to operate UPI, RuPay, IMPS, etc.

🔹 2. Operator
RBI directly operates key centralized payment systems in India:

●​ RTGS (Real-Time Gross Settlement): For high-value real-time transactions​

●​ NEFT (National Electronic Funds Transfer): For retail payments in batch mode​

These systems are critical for smooth inter-bank fund transfers.

🔹 3. Settlement Agent
RBI acts as the settlement bank for many systems and platforms:

●​ Inter-bank settlements​

●​ Clearing houses (e.g., CTS – Cheque Truncation System)​


●​ Net settlement systems like NEFT, ECS​

It ensures finality and irrevocability of fund transfers.

🔹 4. Supervisor
RBI supervises and audits payment systems and their operators:

●​ Ensures adherence to compliance and regulatory guidelines​

●​ Monitors for operational resilience and cybersecurity​

●​ Issues directions for business continuity and risk mitigation​

🔹 5. Catalyst of Innovation
RBI promotes innovation in digital payments and infrastructure:

●​ Launched pilot for CBDC – Digital Rupee​

●​ Supported development of UPI, e-RUPI​

●​ Operates Regulatory Sandbox for fintech innovation testing​

🔹 6. Promoter of Financial Inclusion


RBI ensures payment access to all regions including rural India:

●​ Promotes low-cost digital payments​

●​ Supports UPI for feature phones, offline UPI, AEPS​

●​ Drives financial literacy and digital access initiatives​


🔹 7. Facilitator of Legal Framework
●​ Issues Master Directions, circulars, and guidelines​

●​ Coordinates with other financial and government institutions​

●​ Regularly updates policies to improve systemic safety and innovation​

🔹 8. International Role
RBI represents India in global forums and aligns Indian payment systems with international
standards:

●​ Member of BIS, CPSS, G20 financial stability boards​

●​ Enhances global credibility and interoperability of Indian systems​

✅ Summary (Key Pointers)


●​ RBI is Regulator, Operator, Supervisor, and Settlement Agent​

●​ Operates major systems: RTGS, NEFT, CBDC, etc.​

●​ Promotes financial inclusion and digital innovation​

●​ Acts under the PSS Act, 2007​

Let me know if you want the PDF ready-made, or shall I move on to Part 3: Types of Payment
Systems?

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