The Reserve Bank of India will set up a board for payment and settlement systems (BPSS) to provide efficient governance and best practices in risk management even as it urged banks to focus on legal, institutional and transactional aspects to reach global standards.

"BPSS will function similar to the board of supervision and provide policy directions in areas relating to regulation, supervision of payment and settlement systems, approval of payment systems, criteria for membership and handling of offences," RBI Governor Y V Reddy said in his inaugural address at the Bank Economists Conference, in Mumbai on Thursday.

This would ensure that all payments and settlements in the country are subject to good and efficient governance and that they adopt the best practices in risk management, which is the prime requirement relating to safe, secure and efficient payment and settlement systems, he said.

These arrangements should also facilitate easy transition to a more formal statutory system, he added.

Reddy said a decision has been taken to introduce a system of feedback on supervision on a regular and continuing basis.

"We expect to hold a meeting next week and finalise an ongoing system," he added.

Reddy hoped with this some unnecessary elements would be eliminated while enhancing quality of supervision, particularly in terms of its utility to the supervised, and result in overall reduction in transaction costs.