Important MCQs
Banking Laws
Part 7-Payments and Settlements
Act, 2007.
1. Payment and Settlement Systems Act 2007 does not
apply to?
A. stock exchanges
B. designated trade repository
C. clearing system
D. payment system
E. system providing settlement services
Ans. A.
Definition of 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.
Section 34 - Act not to apply to stock exchanges or clearing corporations of stock exchanges.—
Nothing contained in this Act shall apply to stock exchanges or the clearing corporations of the
stock exchanges.
Section 34A - Act to apply to designated trade repository and issuer—(1) The provisions of this Act
shall apply to, or in relation to, a designated trade repository or issuer, as they apply to, or in
relation to, payment systems to the extent applicable, subject to the modification that, throughout
this Act, unless the context otherwise requires.
2. Who has the Power to remove difficulties under Payment and
Settlement Systems Act 2007?
A. RBI
B. Central Government
C. Payment System
D. Commercial Bank
E. State Government
Ans. B.
Section 37 - Power to remove difficulties—
(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.
3. What is the punishment under Payment and Settlement
Systems Act 2007 in case a person discloses prohibited
information?
A. Imprisonment upto 2 months
B. Imprisonment upto 3 months
C. Imprisonment upto 4 months
D. Imprisonment upto 6 months
E. Imprisonment upto 12 months
Ans. D.
Section 26(4) Penalties - If any person discloses any information, the disclosure of which is
prohibited under section 22, he shall be punishable with imprisonment for a term which may extend
to six months, or with fine which may extend to five lakh rupees or an amount equal to twice the
amount of the damages incurred by the act of such disclosure, whichever is higher or with both.
4. The system participant shall create a panel for
settlement of disputes. This panel will consist of
……………… system participants
A. Two
B. At least two
C. Three
D. At least three
E. Five
Ans. D.
Section 24 - Settlement of disputes- (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.
5. If a system provider wants to cause any change
affecting the structure of payment system, notice of not
less than ……… days is required to be given to system
participants
A. 30
B. 15
C. 45
D. 60
E. 90
Ans. A.
Section 11 Notice of change in the payment system.—(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.
6. Settlement and Trading is given under Section …………. Of
Payment and Settlements Act 2007.
A. 21
B. 23
C. 23A
D. 24
E. 26
Ans. B.
Section 23 - Settlement and netting
(1) The payment obligations and settlement instructions among the system participants shall be
determined in accordance with the gross or netting procedure, as the case maybe, approved by the
Reserve Bank while issuing authorisation to a payment system under section 7, or, such gross or
netting procedure as may be approved by it under any other provisions of this Act.
(2) Where the rules providing for the operation of a payment system indicates a procedure for the
distribution of losses between the system participants and the payment system, such procedure shall
have effect notwithstanding anything to the contrary contained in any other law for the time being in
force. (3) A settlement effected under such procedure shall be final and irrevoca
7. An applicant whose application for operation of payment system
is refused may appeal to Central Government within ………………..
A. 15 days
B. 30 days
C. 45 days
D. 60 days
E. 90 days
Ans. B
Section 9 of Payment and Settlement Systems Act 2007
Appeal to the Central Government—(1) Any applicant for an authorisation whose
application for the operation of the payment system is refused under sub-section (3) of
section 7 or a system provider who is aggrieved by an order of revocation under section 8
may, within thirty days from the date on which the order is communicated to him, appeal to
the Central Government.
8. When can the Reserve Bank revoke the authorization
given to system provider?
A. If a system provider contravenes provisions of this Act
B. If a system provider does not comply with the regulations
C. If a system provider operates the payment system contrary to the conditions subject to which the
authorisation was issued
D. Both a and b
E. All a,b and c
Ans. E.
Section 8 of Payment and Settlement Systems Act 2007
Revocation of authorisation—
(1) If a system provider,—
(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,
9. Any person desirous of commencing or carrying on a
payment system may apply to the …………………..for an
authorisation under this Act
A. Central Government
B. State Government
C. Reserve Bank
D. Banking Codes and Standards Board of India
E. International Financial Service Centre
Ans. C.
Section 5 of Payment and Settlement Systems Act 2007
Application for authorisation—(1) Any person desirous of commencing or carrying on a
payment system may apply to the Reserve Bank for an authorisation under this Act.
10. A bank or any other person participating in a
payment system and includes the system provider is
known as
A. System participant
B. System provider
C. Trade repository
D. Payment system
E. Issuer
Ans. A.
System Participant means a bank or any other person participating in a payment system and
includes the system provider;
11. The objective of Payment and Settlement Systems Act
2007 is?
A. To provide for regulation of payment systems in India
B. To provide for supervision of payment systems in India
C. To designate RBI as authority for regulation and supervision
D. Both b and c
E. All a, b and c
Ans. E.
Preamble of Payment and Settlement Systems Act 2007
An Act to provide for the regulation and supervision of payment systems in India and to
designate the Reserve Bank of India as the authority for that purpose and for matters
connected therewith or incidental thereto.
12. Which of the following is true with respect to derivative under
Payment and Settlement Systems Act 2007?
A. Derivative is an instrument to be settled at a future date
B. Derivative derives its value from change in interest rate
C. Derivative is an instrument to be settled at the date of contract
D. Both a and b
E. Both b and c
Ans. D.
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
13. Payment Instruction means any instrument, authorisation
or order in any form, including electronic means, to effect a
payment
A. by a person to a system participant
B. by a system participant to another system participant
C. by a system participant to a person
D. Both a and b
E. All a, b and c
Ans. D.
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;
14. Which of the following is true with respect to
systemic risk?
A. This is a risk arising from the inability of a system participant to meet his payment obligations
B. This is a risk arising from any disruption in the system
C. If there is any doubt with respect to systemic risk, decision of Reserve Bank shall be final
D. All a, b and c are true
E. None of a, b and c are true
Ans. D.
Systemic risk means the risk arising from—
(i) the inability of a system participant to meet his payment obligations under the payment
system as and when they become due; or (ii) any disruption in the system, which may cause other
participants to fail to meet their obligations when due and is likely to have animpact on the stability of
the system: Provided that if any doubt or difference arises as to whether a particular risk is likely to
have an impact on the stability of the system, the decision of the Reserve Bank shall be final;
15. Payments Regulatory Board shall consist of ………
members
A. 4
B. 5
C. 6
D. 8
E. 9
Ans. C.
Section 3
(2) The Reserve Bank shall exercise the powers, perform the functions and discharge the duties
conferred on it under this Act through a Board to be known as the ―Payments Regulatory Board.
(3) The Board shall consist of the following members, namely— (a) the Governor of the Reserve
Bank–Chairperson, ex officio; (b) the Deputy Governor of the Reserve Bank in-charge of the
Payment and Settlement SystemsMember, ex officio; (c) one officer of the Reserve Bank to be
nominated by the Central Board of the Reserve BankMember, ex officio; and (d) three persons to be
nominated by the Central Government-Members..
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