Distinguish between the RBI's powers under the Banking Regulation Act, 1949 and the Payment and Settlement Systems Act, 2007, with recent examples.

The RBI wears two regulatory hats. Under the Banking Regulation (BR) Act, 1949 it supervises the institutions that take deposits. Under the Payment and Settlement Systems (PSS) Act, 2007 it oversees the systems that move money. The Paytm case shows the two tracks working separately.

Distinguishing the two frameworks

Basis	BR Act, 1949	PSS Act, 2007
Regulates	Banking companies (deposits, lending)	Payment systems (wallets/PPIs, cards, aggregators)
Entry gate	Banking licence (Sec 22)	Prior authorisation (Sec 4); no PPI system can run without it [2]
Directions	Issued to banks in the public or depositor interest (Sec 35A)	Issued to system operators (Sec 17); PPI Master Directions issued under Sec 18 read with 10(2) [2]
Core concern	Depositor safety, solvency, governance	Safe, efficient, interoperable payments
Penal tools	Inspection, removal of managers (Sec 36AA), licence cancellation	Revocation of authorisation (Sec 7), monetary penalties

Recent examples

• BR Act route: On 31 January 2024, the RBI used Section 35A against Paytm Payments Bank Ltd. (PPBL). Audits had revealed persistent non-compliances, so it barred deposits and top-ups in accounts, wallets and FASTags after 29 February 2024 [1].
• PSS Act route: In November 2026, One97 Communications received in-principle approval to operate Prepaid Payment Instruments. Final authorisation will follow only after it meets the RBI's conditions [4]. A wallet is a payment product, not a bank deposit, so this route stayed open despite the action against PPBL.
• Evolving rulebook: The RBI moved from the 2017 Directions, which split PPIs into closed, semi-closed and open systems [3], to the 2021 Master Directions, which it keeps updating [2].

Where the two overlap

• A wallet issued by a bank falls under both laws. Banking curbs on PPBL therefore froze its wallets and FASTags as well [1], which showed the concentration risk for users.

In short, the BR Act regulates institutions that hold public deposits, while the PSS Act regulates systems that move money. Fintech is blurring this line, so the RBI should supervise by activity and in graded steps, with safeguards for moving customers in an orderly way. That would keep public trust and support safe, inclusive digital payments.