On 9 May 2025, a bureaucratic sleeper cell came to life. With a short notice – S.O. 2031(E), signed on 6 May, the Ministry of Finance pressed “activate” on §152 and §153 of the Finance Act 2017, the long-dormant clauses that add sweeping new powers onto the Payment and Settlement Systems Act 2007 (PSS Act). In one stroke the Reserve Bank of India (RBI) gains a fully-fledged Payments Regulatory Board (PRB)—a single referee for every rail that moves money inside the country, from UPI’s instant QR codes to prepaid transit cards. Eight years after lawmakers drew up the plan, the regulator finally has a pulse.
A Regulator Born in Slow Motion
The Finance Act 2017 was passed during India’s cash-crunch upheaval, but its payment-reform sections never took effect. Successive governments worried that a heavy central hand might smother the frenetic innovation that made UPI the world’s busiest real-time network. Yet success creates its own risks: by mid-2024 UPI was clearing more than 12 billion transactions a month, zero-fee merchant discount rates (MDRs) were squeezing PSP margins, and outages on single points of failure, NPCI’s switch or a large issuer’s core, were no longer merely inconvenient; they were systemic. The Finance Ministry’s notification is Delhi’s admission that DIY self-governance has run its course.
What Exactly Can the PRB Do?
The amendments hand the Board powers that go well beyond the RBI’s existing supervisory toolkit. It can set or cap any fee charged by a “payment system or participant”; declare a rail or operator “systemically important” (triggering tougher resilience rules); and issue binding directions on interoperability to end closed-loop silos. Non-compliance invites penalties of up to ₹10 crore (about US $1.2 million) per breach – high enough to sting even deep-pocketed super-apps.
Crucially, the PRB is chaired by the RBI Governor but includes representatives from the Treasury and the Department of Electronics & IT, knitting policy, prudence and infrastructure under one roof. In effect, India’s payments stack now answers to its own mini-Basel committee.
Winners, Losers and the Fee-Cap Puzzle
For merchants and consumers the Board’s very first agenda item matters most: fees. Today UPI operates on a politically popular but economically awkward zero-MDR model. PSPs depend on float income and data-driven cross-sell to survive, a margin recipe that thins as interest rates fall and privacy rules tighten. If the PRB uses its fee-setting power to replace the hard zero with a flexible cap, say 10–15 bps on high-value or commercial transactions, banks and fintechs gain breathing room without shocking small merchants.
Wallet and BNPL operators have a different headache. Interoperability directives could force closed-loop apps to expose open APIs or embrace tokenised card standards, eroding the walled-garden grip that boosts stickiness, and valuation. Yet the upside is a bigger total addressable market: uni-wallet users become multi-rail shoppers overnight.
Banks, meanwhile, eye the new systemically important label warily. Today that tag applies only to NPCI, but a next-tier designation for the largest UPI issuers or gateway banks would trigger higher resilience spending and, potentially, extra capital buffers. Shareholders will want clarity before the PRB’s first consultation paper, expected in Q3 2025, drops into inboxes.
The View from Asia—Copycats Incoming
India is the region’s petri dish for instant payments at scale, and its regulatory moves rarely stay within its borders. Indonesia, the Philippines and Malaysia each juggle real-time rails, overlay QR schemes and a patchwork of older card systems. Their central banks have so far relied on memorandum-style coordination committees; India’s single-board model offers a more aggressive template. Watch for Jakarta’s BI-FAST task-force or Manila’s InstaPay Governance Committee to pick up language straight from the PSS amendment playbook.
What Industry Players Should Do Now
For payment service providers, the three-month runway to the PRB’s first policy paper is not downtime; it is prep time.
- Model Fee Scenarios: Swap the current zero-MDR assumption for a sliding cap in your 2025–27 forecasts; decide whether a small processing fee could be passed on or must be absorbed.
- Audit Interoperability Gaps: If any QR, NFC or in-app flow still runs on proprietary standards, map the cost of migration to Bharat QR and EMVCo specifications now. The Board will almost certainly mandate convergence.
- Tighten Resilience Playbooks: High-traffic PSPs should treat a “systemic” designation as inevitable. Stress-test plans for 99.995 % uptime, geographic failover and 15-minute public incident disclosure—levels already whispered in RBI corridors.
A New Normal – Regulated, Yet Still Restless
Sceptics fear the PRB could become a speed-brake on India’s hard-won payment agility. But the lesson from mature markets is that scale without structure breeds fragility; when a rail processes half the nation’s GDP on peak festival days, the social cost of downtime dwarfs the private cost of compliance. The Board’s challenge is to temper risk without dulling innovation—perhaps by using penalty sticks sparingly and consulting liberally with industry caucuses.
For stakeholders outside India, the signal is loud: payments are now considered critical infrastructure, and critical infrastructure gets a dedicated regulator. Align early, on fees, uptime and open standards, and the coming ruleset will feel like a catalyst, not a cage. Ignore it, and the ₹10-crore stick will be the least of your worries.
As India’s Payments Regulatory Board settles into its new office on Mint Street, expect a year of white papers, stakeholder round-tables and, inevitably, court challenges. Yet the direction of travel is locked in: real-time payments have finally outgrown their startup hoodie and slipped into a tailored regulator’s suit. The rest of Asia is likely already taking notes.