The inter-Ministerial Committee for Finalization of Amendments of PSS (Payments & Settlement System) Act 2007 have submitted their report now and I would call this a very positive step towards taking India to Payments 2.0. Before we talk about PSSA2018 Amendment Draft, let’s look at how it all started. When Payments & Settlement System Act 2007 was passed by Parliament in December 2007, it initiated the first phase of recognizing payments from Banking or Classic Banking. Classic Banking is, “Accepting for the purpose of lending & investment, of deposit of money from individuals or legal entities”. Bank’s earnings would directly depend on how they are able to reduce the cost of deposit through Current Account Savings Account (called CASA in the banking industry) and are able to lend at higher rates with the decision on security/risk taken for such lending. Apart from the interest income, banks would impose a different kind of fee for providing loan products, as an additional revenue stream.
Payments, on the other hand, is transfer of monitory value from a person/legal entity to another person/legal entity for either consideration towards goods and services rendered or just transfer of money. In case of payments for goods and services, or merchant payments, merchant delivering goods/services pay a fee what is called MDR (Merchant Discount Rate) and for money transfer service (called Person to Person P2P payments), a customer sending money is charged fee for performing money transfer service.
If one looks at Classic Banking systems and Classic Payments system, their business interest and business cases are different.
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