The Reserve Bank of India ("RBI") has redesigned its regulatory framework for the burgeoning digital payment ecosystem in India. RBI framed the 'Payments Regulatory Board Regulations, 2025' ("Regulations"). The Regulations published on 20th May 2025 mark a significant stride toward enhancing and strengthening the regulatory framework governing payment and settlement systems in India.

The BPSS to PRB Transition

The most significant change involves replacing the Board for Regulation and Supervision of Payment and Settlement Systems Regulations 2008 with the newly established Payments Regulatory Board (PRB). This alteration depicts an overhaul by the RBI in its management frameworks for payment systems; it replaces an archaic supervisory board with a modern regulatory authority that has explicit functions. This shift reflects the RBI's intention to recalibrate its supervisory framework in consonance with the dynamically evolving digital payments ecosystem.

Powers and Responsibilities: Comprehensive Insights

The PRB derives its authority from the Payment and Settlement Systems Act of 2007 ("PSSA"), provisions specifically laid down in sub-section (4) of section 3 and sub-sections (1) and (2) of section 38. The Regulations explain in more detail the structure and operation of the board; however, its primary purpose is to regulate and oversee payment and settlement systems within India. This includes:

• (a) Rules enabling payment and settlement systems to function effectively.
• (b) Instructing companies working in this area
• (c) Ensuring that all payment and settlement operations within the country are conducted in a smooth, safe, and efficient manner.

The board may delegate specific matters within its purview to its chairperson, a member, a smaller committee, or officers of the bank for the sake of efficient administration. In addition, the DPSS Department of RBI will assist the Board, indicating clearly its significant and powerful role in regulating payments.

Who Falls Under the New Framework?

One of the important questions that fintech companies are likely to pose is about which entities the board will regulate. Since the board derives its power from the PSSA, then pursuant to that act, its authority covers all 'payment systems.' Such a wide definition means it will include many other players in the digital payments space, including:

• (a) Prepaid Payment Instruments (PPIs): Issuers of PPIs such as mobile wallets and gift cards are integral to the payment system. Such entities operate payment systems; hence, the board will regulate them.
• (b) Payment Aggregators (PAs): PAs facilitate online payments by onboarding merchants and processing payments. The crucial role they play in the payment process implies that they will also be regulated by the board to ensure compliance with operational and security requirements.
• (c) Payment Banks: This is a specialized category of banks, licensed by the RBI, primarily to provide payment services. By definition, payment banks form part of the payment and settlement system. Hence, the board shall directly regulate and supervise their operations to ensure compliance with the regulations and safeguard customers.

5 Key Facts for Fintechs:

1. Structure

The has six members: the chairperson, who is the RBI Governor, the Deputy Governor (Department of Payment and Settlement Systems), one representative from RBI, and three central government nominees.

2. Role

The PRB focuses on regulatory oversight of payment systems with an intention to enhance monitoring, promote accountability, and achieve uniformity in policy implementation. It falls under the purview of rule-setting for payment systems, licensing operators of payment systems, and ensuring compliance with regulations.

3. Government Representation

The presence of government appointees in the PRB is an indication that the authority seeks to manage and control over some important digital infrastructures like UPI, which makes up a huge portion of cashless transactions. It thus reflects the growing role of the government in regulating the digital payments ecosystem.

4. Implications for Fintechs

The establishment of the PRB and the appointment of government representatives thereto denote a shift toward more organized and transparent management of payment systems. Fintechs should expect to be supervised in a unified manner and to have regulations and guidelines from the PRB to comply with.

5. Regulatory Framework

The PRB's rules would generally promote the security, reliability, and accessibility of digital payments, especially for focus groups that are underbanked. The framework also supports innovation as well as competition within the broader digital payments ecosystem.

Looking Ahead: A Stronger Digital Economy

The Payments Regulatory Board represents more than just a shift in regulation; it embodies India's intent to spearhead the global digital payments revolution while upholding the best standards of security and inclusivity. As the architecture unfolds, it shall massively impact the progress of digital financial services not only in India but also across emerging economies worldwide.