Exclusive: IAMAI, iSPIRT in fray to set up regulatory body for digital payments in India

Mumbai/Bengaluru: India’s two most influential technology and internet associations are in the fray to set up an industry body to supervise the country’s burgeoning digital payments ecosystem under Reserve Bank of India’s Self-Regulatory Organisation (SRO) framework, three sources aware of the matter told ET.

The Internet and Mobile Association of India (IAMAI), an industry body of all the leading internet and technology companies in the country, is preparing a proposal led by its digital payments arm, the Payments Council of India (PCI). The Indian Banks’ Association (IBA) is also considering joining the bid with PCI to form this SRO, the sources said.

Bengaluru-based thinktank, Indian Software Products Industry Round Table (iSPIRT), the architect of several of India’s core digital rails like Unified Payments Interface and Aadhaar, is also preparing its bid through a group entity—Digital Collective for Empowerment (DICE), the sources said.


A spokesperson for DICE, however, denied participating in the bid. “To clarify, DICE is not preparing an SRO proposal…,” said Saranya Gopinath, founder of DICE and volunteer at iSPIRT.

PCI and iSPIRT have hired consultants and are setting up their respective non-profit entities — under the Companies Act as mandated by the RBI framework — that will front the SRO bid, the sources added. A formal proposal is expected to be presented before the regulator in the next three months, they indicated.

“From the very beginning, we have been clear and transparent about our objective to set up an SRO for the digital payments industry,” Navin Surya, chairman-emeritus of PCI, said. The approach has been voluntary, he added.

“We suggested the idea to the regulator even before the framework was released. Our objective is to create an SRO that has the most diverse membership from all relevant stakeholders. The mandate really is to issue appropriate standards in implementation of regulations, while also keeping our lines of communication open with RBI,” Surya said.

Though owned by IAMAI, PCI is a separate legal entity comprising a wide range of ecosystem stakeholders in India's payments and settlement system.

The new SRO for payment system operators (PSOs), as envisaged by the central bank, would broadly liaison between the industry, government and regulators for streamlining policy decisions, improving communication, enforcing standards and resolving disputes.

“The purpose of an SRO is also to outsource some of the supervision mandate of RBI to a relevant and competent authority of industry participants. It is also to promote a principle and consultation-based formulation of regulation to foster ecosystem growth,” said a senior banking official.

Specific objectives pertaining to compliance among payment gateways (PGs) and payment aggregators (PAs), smoothening of the backend integrations of New Umbrella Entities (NUE) granted licenses by RBI with the parallel systems of National Payments Corporation of India, could also be among the SRO’s objectives.

In short, an SRO for payments would work like how the Association of Mutual Funds in India (AMFI) is for capital markets and MFIN is for microfinance.

The final proposal has to be submitted to the Department of Payments and Settlement Systems of the banking regulator.

SROs to self govern the payments ecosystem has been a long-stated objective of the central bank. The proposed SRO can only have regulated banks or non-banks as members. It can, however, be a group or an association of payment system operators as well.

“As the payment ecosystem matures and the number of payments systems proliferate, it becomes necessary, in the interest of optimal use of regulatory resources, that the payments industry develops standards in respect of system security, pricing practices, customer protection measures, grievance redressal mechanisms, etc,” RBI’s framework document released in October 2020 stated.

“While self-regulation would release regulatory resources that can be better focused on issues of systemic importance, it would, by virtue of being developed by the industry itself, be more appropriate and encourage better compliance,” it had said.