The pandemic forced an inevitable shift to digital payments but Indians continue to have a strong bias for cash payments, a report said.
Due to the emergence of disruptive technologies leading to technology led payment solutions, there is a need to reassess the Payment and Settlement Systems Act, 2007 (PSS), a key enabler for promoting digital transactions, the report by Vidhi Centre for Legal Policy said.
The Act was enacted more than a decade back when the digital payments market in India was at its nascent stage and the law was primarily enacted to regulate payment systems from a systemic perspective and to confer the RBI with necessary powers to regulate these systems, it said.
While the RBI has time and again sought to address the existing gaps in the primary law through directions issued from time to time, this may not be the optimal regulatory or policy response, it said.
Such an approach is also not in line with the international best practices where several countries have, along with policy interventions, undertaken efforts to modernise their payments law to adapt to the rapidly evolving industry, it said.
The report recommended that India needs to reassess the PSS Act taking into account the developments in the retail payments sector since its enactment and the future of digital payments in India.
It suggested a renewed retail payment services law (Proposed Law) for India built on the principles of proportionate regulation to tap the full potential of retail digital payments.