 "A man walks past the RBI headquarters in Mumbai. Photo: Kamlesh Pednekar")
On a day when banks and card companies were on damage-control mode for security breach in 3.2 million cards, Reserve Bank of India (RBI) today prescribed rules for imposing monetary penalty on payment system operators and banks for breaches.
The non-compliance of directions and violations of terms and conditions of authorisation can translate into a penalty of anywhere between Rs 5 lakh to Rs 1 crore.
"The amount of penalty/fine for the various payment system operators / banks would be based on the nature of offences with a minimum penalty of Rs 5 lakh. Where the violation is not quantifiable, a penalty of minimum Rs 5 lakh with a maximum of Rs 1 crore would be levied," said RBI. The Payment and Settlement Systems Act, 2007 has designated RBI as the authority for regulation and supervision of payment systems.
The banking regulator said that the fine can be levied in three scenarios -in case of violations of terms and conditions of authorisation or if there is a contravention of provisions of the Act or in case of non-compliance of directions or order.
Before imposing the penalty/fine or compounding of the offence on the payment system operators, banks, RBI will issue of letter to the entity calling for explanation citing the offence. Based on the explanation and information/evidence submitted by the entity, RBI will examine whether the contravention/offences can be considered for compounding or levy of penalty/fine. If not satisfied, RBI can issue show cause notice for imposing penalty.
The players on whom the fine has been levied will have to disclose it on their website and in their annual financial statements.
