What changed
RBI introduced a structured Dispute Resolution Mechanism for all authorized payment systems, replacing ad-hoc processes. It requires clearing houses to form a five-member Panel for Resolution of Disputes (PRD) to handle clearing-related disputes within 15 working days. The mechanism excludes fraud, internal issues, and disputes with customers or sub-members.
What it means for you
Banks and payment system providers must now set up formal dispute resolution panels, ensuring uniformity and transparency. This reduces operational risks by providing a clear framework for resolving disputes, but adds compliance costs and timelines. Lenders must train staff and update internal processes to align with RBI's directive.
What you must do
- Form a five-member PRD at each clearing house within three months, with four system participants and the President as chair.
- Ensure PRD resolves disputes within 15 working days and replaces conflicted members.
- Exclude fraudulent acts, internal operations, and customer disputes from the mechanism.
Who it affects
All authorized payment system providers, System participants (banks) in clearing houses, Clearing house management teams
What types of disputes are covered under this mechanism?
It covers clearing and settlement-related disputes within the rules, regulations, and guidelines of payment products, including RBI instructions. It excludes fraud, internal operational issues, and disputes with customers or sub-members.
What is the timeline for implementing this mechanism?
All authorized payment system providers must put the Dispute Resolution Mechanism in place within three months from the circular date, i.e., by December 24, 2010.
How is the PRD composed and what is its decision timeline?
The PRD has five members: four from the Standing Committee (excluding the system provider) and the President as chair. It must dispose of disputes within 15 working days of submission.