Establishment and Operationalization of the Payments Regulatory Board (PRB): UPSC Current Affairs Story Arc

Overview

This arc tracks the evolution of India's payment governance from an internal RBI function to a formalized statutory framework. Triggered by legal notifications in May 2025, the Reserve Bank of India (RBI) operationalized the Payments Regulatory Board (PRB) to oversee the country’s massive digital and non-cash payment systems. Unlike its predecessor, the PRB includes three government nominees alongside RBI officials, mirroring the structure of the Monetary Policy Committee (MPC). This shift aims to enhance the safety, efficiency, and stability of systems like UPI and RTGS while providing a platform for broader policy coordination between the central bank and the government. The process culminated in the first official meeting in Mumbai on January 6, 2026.

How This Story Evolved

Legal notification enabling PRB (May 2025) → Constitution of the Board members (Oct 2025) → First meeting and operationalization (Jan 2026)

1. 2025-05-09: RBI to act through 'Payments Regulatory Board'
   More details

   UPSC Angle: RBI to act through 'Payments Regulatory Board'.

   Key Facts:

   • Effective date: May 9, 2025
   • Sections 152 and 153 of the Finance Act, 2017 amend the Payment and Settlement Systems Act, 2007
   • RBI will use a 'Payments Regulatory Board'
2. 2025-10-01: RBI Constitutes Payments Regulatory Board
   More details

   UPSC Angle: RBI constituted a six-member Payments Regulatory Board (PRB).

   Key Facts:

   • RBI constituted a six-member Payments Regulatory Board (PRB).
   • The board is chaired by the RBI governor.
   • The board includes three nominees from the central government.
   • PRB replaced the Board for Payment and Settlement Systems (BPSS).
3. 2026-01-06: Payments Regulatory Board Operationalized
   More details

   UPSC Angle: Payments Regulatory Board (PRB) operationalized.

   Key Facts:

   • First meeting of Payments Regulatory Board (PRB) held in Mumbai
   • Sanjay Malhotra is the chairman of PRB
   • PRB is a statutory body
   • The Reserve Bank of India exercises regulatory and supervisory powers through PRB
   • Ensures safety, efficiency, and stability of digital and non-cash payments

Genesis

Trigger

The notification of Sections 152 and 153 of the Finance Act, 2017 on May 9, 2025, which legally amended the Payment and Settlement Systems Act, 2007.

Why Now

The delay from 2017 to 2025 likely stemmed from debates over the board's composition and the degree of RBI's independence versus government oversight in the payment's domain.

Historical Context

Previously, payment systems were regulated by the Board for Payment and Settlement Systems (BPSS), a sub-committee of the RBI Central Board established in 2005. The Watal Committee (2016) had recommended an independent payments regulator to foster competition and innovation.

Key Turning Points

1. [2025-05-09] Enforcement of Finance Act 2017 amendments

   It provided the legal mandate to dissolve the internal BPSS and replace it with the statutory PRB.

   Before: RBI regulated payments through an internal committee. After: Regulation is conducted through a statutory board with government representation.

2. [2025-10-01] Constitution of the 6-member PRB

   Finalized the institutional design, confirming the balance of power between the RBI and the Government.

   Before: Governance structure was unclear. After: A defined 6-member board (including 3 government nominees) was established.

Key Actors and Institutions

Key Institutions

• Reserve Bank of India (RBI)
• Payments Regulatory Board (PRB)
• Ministry of Finance
• Board for Payment and Settlement Systems (BPSS)

Key Concepts

Payment and Settlement Systems Act, 2007

The primary legislation providing the legal framework for the regulation and supervision of payment systems in India.

Current Fact: Sections 152 and 153 were amended via the Finance Act 2017 to enable the PRB.

Statutory Body

An organization with the power to enforce laws on behalf of the state, created by an Act of Parliament rather than a constitutional provision.

Current Fact: The PRB was officially described as a statutory body during its first meeting on Jan 6, 2026.

Regulatory Governance

The institutional setup used to oversee a specific sector, often balancing independence from political interference with public accountability.

Current Fact: The PRB includes three nominees from the central government to ensure wider representation.

What Happens Next

Current Status

As of January 6, 2026, the PRB is fully operationalized following its inaugural meeting in Mumbai.

Likely Next

Issuance of new supervisory frameworks for fintech entities and updated security protocols for cross-border digital payments.

Wildcards

Potential friction between the three government nominees and RBI officials on issues like 'zero MDR' (Merchant Discount Rate) or data localization requirements.

Why UPSC Cares

Syllabus Topics

• Statutory, regulatory and various quasi-judicial bodies
• Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment

Essay Angles

• The balance between Central Bank independence and Government oversight in the digital age.
• Institutional reforms as a prerequisite for a $5 trillion digital economy.

Prelims Likely: Yes

Mains Likely: Yes

Trend Signal: rising

Exam Intelligence

Previous Year Question Connections

• Directives relating to 'Storage of Payment System Data' (Data Diktat). — The PRB now holds the statutory authority to issue such directives under the amended PSS Act.
• Chairman of the Committee on Deepening Digital Payments (Nandan Nilekani). — Committees like Nilekani's laid the groundwork for the institutional shift toward a dedicated Payments Regulatory Board.

Prelims Angles

• The PRB replaces the Board for Payment and Settlement Systems (BPSS).
• The PRB consists of 6 members, including 3 nominees from the Central Government.
• The RBI Governor serves as the ex-officio Chairman of the PRB.
• The PRB derives its statutory powers from the Payment and Settlement Systems Act, 2007 (as amended).

Mains Preparation

Sample Question: Critically analyze the institutional shift from the Board for Payment and Settlement Systems (BPSS) to the statutory Payments Regulatory Board (PRB). Does the inclusion of government nominees on the board compromise the RBI's regulatory independence?

Answer Structure: Intro: Define PRB and its statutory origin (PSS Act 2007/Finance Act 2017) → Body 1: Comparison between BPSS (internal) and PRB (statutory/inclusive) → Body 2: Benefits of the new structure (policy coordination, accountability) → Critical Analysis: Potential risks to RBI's autonomy and parallels with the MPC → Conclusion: How PRB strengthens the 'Safe, Secure, Efficient' payment vision for India.

Essay Topic: Digital Sovereignty and Institutional Integrity: Navigating the Future of Indian Finance.

Textbook Connections

Key Takeaway

The operationalization of the PRB marks a transition from 'internal departmental oversight' to 'statutory institutional regulation,' formalizing government participation in the governance of India's digital payment infrastructure.

All Events in This Story (3 items)

1. 2025-05-09 [Economy] — RBI to act through 'Payments Regulatory Board'
   The government has designated May 9, 2025, as the effective date for enforcing Sections 152 and 153 of the Finance Act, 2017, which amend the Payment and Settlement Systems Act, 2007. The RBI will now exercise its powers and functions under this Act through a 'Payments Regulatory Board,' instead of a committee of its Central Board.
   More details

   UPSC Angle: RBI to act through 'Payments Regulatory Board'.

   Key Facts:

   • Effective date: May 9, 2025
   • Sections 152 and 153 of the Finance Act, 2017 amend the Payment and Settlement Systems Act, 2007
   • RBI will use a 'Payments Regulatory Board'
2. 2025-10-01 [Economy] — RBI Constitutes Payments Regulatory Board
   The Reserve Bank of India (RBI) has constituted a six-member Payments Regulatory Board (PRB) to oversee the functioning of payment systems in the country. The board is chaired by the RBI governor and includes three nominees from the central government. The PRB replaced the Board for Payment and Settlement Systems (BPSS), and unlike BPSS, it includes nominees from the central government.
   More details

   UPSC Angle: RBI constituted a six-member Payments Regulatory Board (PRB).

   Key Facts:

   • RBI constituted a six-member Payments Regulatory Board (PRB).
   • The board is chaired by the RBI governor.
   • The board includes three nominees from the central government.
   • PRB replaced the Board for Payment and Settlement Systems (BPSS).
3. 2026-01-06 [Economy] — Payments Regulatory Board Operationalized
   The first meeting of the Payments Regulatory Board (PRB) was held in Mumbai, marking the operationalization of the new payments governance framework. The PRB is a statutory body through which the Reserve Bank of India exercises regulatory and supervisory powers over payment and settlement systems in India, ensuring the safety, efficiency, and stability of digital and non-cash payments. Sanjay Malhotra is the chairman of PRB.
   More details

   UPSC Angle: Payments Regulatory Board (PRB) operationalized.

   Key Facts:

   • First meeting of Payments Regulatory Board (PRB) held in Mumbai
   • Sanjay Malhotra is the chairman of PRB
   • PRB is a statutory body
   • The Reserve Bank of India exercises regulatory and supervisory powers through PRB
   • Ensures safety, efficiency, and stability of digital and non-cash payments