MediaNama’s Take: In December 2016, the Watal Committee report recommended that the government make the regulation of payments independent of the central banking functions of the Reserve Bank of India (RBI). Eight years later, the government has constituted a Payments Regulatory Body (PRB) to oversee the functioning of payment systems in the country. However, this regulatory body remains under the supervision of the RBI, which isn’t neutral.
In its report, the Watal Committee hinted at the heavy-handed approach of banks, stating, “Fintech companies that require to connect to banking systems to serve their customers tend to face restrictive practices. This anti-competitive setting is not conducive for innovation and consumer interest.”
Payment regulation in India still lacks neutrality. Even with the PRB’s creation, the structure remains under RBI’s influence, so deep change seems unlikely.
For instance, the National Payments Corporation of India (NPCI) is a non-profit entity incorporated under Section 8 of the Companies Act, 2013, and owned by a consortium of banks, the RBI has the authority to issue directions, supervise, and impose penalties on NPCI and other payment operators. Through the NPCI, the central bank regulates the Unified Payments Interface (UPI) ecosystem. This further exposes the RBI’s lack of neutrality in payment regulations.
“If you look at the UPI ecosystem, there have been multiple efforts to de-risk it, with several committees, including Watal, pointing out that we’re too dependent on a single payment ecosystem. Whenever UPI breaks down or faces a glitch, it becomes a significant weak spot,” Roy said.
Notably, the Watal Committee report also pointed out that payment systems run by the RBI are conflicted. “The most notable distortion in the market is the case of RTGS, NEFT, and NECS, where the RBI performs both commercial as well as regulatory functions. This leads to a conflict of interest and goes against the principles of competitive neutrality,” the report says. In the past, the Internet and Mobile Association of India (IAMAI) and the Payments Council of India (PCI) had also called for a law to ensure payments neutrality.
“By including government representatives, the PRB gives the state direct influence over payments regulation. Nonetheless, because the RBI Governor—or, in his absence, the Deputy Governor, retains overriding authority in case of conflict, concerns arise. Such an arrangement risks creating regulatory outcomes that disproportionately favour banks, potentially to the detriment of independent payment companies.
What’s the News?
On September 30, 2025, the Reserve Bank of India (RBI) announced that it has constituted a six-member Payments Regulatory Body (PRB), comprising three members from the Central government, to oversee the functioning of the country’s payment systems.
The PRB is responsible for the regulation and supervision of all…
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