What changed
The RBI has issued a revised framework superseding the January 10, 2020 circular on penalties under the PSS Act. The update incorporates amendments from the Jan Vishwas (Amendment of Provisions) Act, 2023, effective January 22, 2024, and aims to rationalize and consolidate enforcement actions. The new framework takes effect from January 30, 2025.
What it means for you
Banks and payment system operators must align their compliance processes with the updated penalty framework, which includes a consolidated list of contraventions and revised penalty provisions. The maximum penalty under Section 30 remains ₹10 lakh or twice the quantifiable amount involved, whichever is higher. Non-compliance with KYC/AML norms, data storage requirements, and net worth directives are explicitly covered under Section 26(6).
What you must do
- Review the revised penalty framework and update internal compliance manuals accordingly.
- Ensure all payment system operations are authorized and comply with RBI terms and conditions.
- Strengthen KYC/AML processes and data storage practices to avoid Section 26 violations.
- Train compliance teams on the updated list of contraventions and penalty calculation methods.
- Monitor net worth requirements and nodal/escrow account maintenance to prevent defaults.
Who it affects
Authorised Payment System Operators, Banks offering payment services, Compliance and legal teams of financial institutions, KYC/AML and data management departments
What is the maximum penalty under the revised framework?
Under Section 30 of the PSS Act, the RBI can impose a penalty up to ₹10 lakh or twice the amount involved in the contravention, whichever is higher, for defaults under Section 26(2), (3), and (6).
Which contraventions are explicitly listed in the new framework?
The framework lists contraventions such as operating without authorization, false statements, failure to produce documents, prohibited disclosure, non-compliance with RBI directions, and defaults under Section 26(6) including KYC/AML norms, data storage, net worth, and PPI limits.
When does the revised framework take effect?
The revised framework is effective from January 30, 2025, and supersedes the earlier circular dated January 10, 2020.