Seminar on
Reduction / Elimination of Cash
in Government Transactions
Reserve Bank of India
Dept. of Payment & Settlement Systems
Central Office, Mumbai
Presentation Structure
• Overview of Payment & Settlement Systems
• Introduction to Electronic Payment Systems
• Present status in the country and the North
Eastern states
• Roadmap for implementation in North Eastern
states for Government transactions
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Overview of Payment & Settlement Systems
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Payment System
“A set of instruments, procedures and rules for the
transfer of funds
 between or among participants, as well as
the entity operating the arrangement
 typically based on an agreement between or
among participants and the Financial Market
Infrastructure
 transfer of funds is effected using an agreedupon technical infrastructure”
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Legal Basis
 Payment and Settlement Systems Act, 2007
 BPSS the apex body
 No payment system to operate without authorisation
 RBI as the regulator and supervisor
 Legal basis for Netting
 Dishonor of electronic debit instruction on par with
Cheque
Directives Issued
 Settlement and Default Handling Procedures
 Dispute Resolution framework
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Mission
“To ensure that all the payment and
settlement systems operating in the
country are Safe, Secure, Sound,
Efficient, Accessible and
Authorised".
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Payment Systems –
Major Milestones
HV Close /
Directives on
Settlement,
Defaults and
Disputes
2008
RTGS
IT ACT
CTS / NECS /
Mobile / NPCI /
Act
Notification
2005
DPSS /
NEFT /
NFS
2002
EFT /
IDRBT
CCIL
MICR
1994
INFINET
1986
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ECS
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Payment Systems
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Payment Systems – By volume
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Payment System – By value
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Introduction to Electronic Payment Systems
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Electronic Payment Systems (EPS)
•
•
•
•
•
•
Simpler
Safer
Faster
Cost Effective
Enhanced Reach
Eco-friendly
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Why EPS
Cash / Paper
Electronic
Physical Movement of cash / paper
instruments
Electronic Message movement
Fraud prone as paper moves outside
the banking system
Message moves inside the banking system
hence less prone to frauds
Geographical restrictions
No such restrictions. Payment anywhere in
India possible
Time required to move paper makes
the system slow
Electronic movement of messages makes
the system real time
Operational cost of running the
system very high
Operational cost is very low
As volume increases, logistics to be
increased
No such requirement
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EPS – Benefits
• Individuals Beneficiaries –
– Funds in on the due date
– Bills / EMIs paid automatically
– No frequent writing of cheques / standing in the queue
• Govt. Departments / Corporates
– Instruction based
– Direct payment / receipt on due date / time
– Easy Reconciliation
– Cost effective
– No interaction between payer and payee
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EPS - Variants
• Electronic Clearing Service (ECS)
– ECS – Credit and Debit
– National ECS
– Regional ECS – Credit and Debit
• National Electronic Funds Transfer (NEFT)
• Real Time Gross Settlement (RTGS)
• Alternate Payment Channels
–
–
–
–
Internet Banking
ATMs
Mobile Banking
Pre-paid Payment Instruments
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Electronic Clearing Service (ECS)
• Used for bulk transfers – repetitive payments or
receipts
• Disbursement of funds – from one source to many
beneficiaries – called Credit
• Collection of funds – to one beneficiary from many
customer s – called Debit
• Operates on a T+1 basis
• Available at 90 major locations
• Geographical restriction – confined to cover local
Clearing House only
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ECS – Users
• All prominent listed companies on exchanges
• Used for
–
–
–
–
–
Salaries
Vendor Payments
Dividends
IPO / FPO refunds
Bill Collections (Telephone, Electricity, Water), EMIs, School /
Exam fee collection etc.
• Handled 16.7 mn transactions for value Rs 253.51 bn
during October 2010
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National ECS
•
Credit Clearing introduced in September 2008
•
Centralised processing at Mumbai
•
Covers about 52,000 branches
•
File acceptance timings extended till 6.30 pm
•
Processes around 75% of total ECS Credit
volumes
•
Handled 2.6 mn. transactions in a single day
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Regional ECS (RECS)
• Credit and Debit Variants at Ahmedabad, Bangalore,
Bhubaneshwar, Chennai, Kolkata – Since launched
• Guwahati, Hyderabad and Jaipur – Ready for implementation
• Bhopal, Kanpur, New Delhi, Nagpur and Patna – Being planned
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National Electronic Funds Transfer (NEFT)
• NEFT facilitates one-to-one funds transfers between banks, irrespective
of location
• Eleven Hourly Settlements from 9 am to 7 pm
• Covers 101 banks and about 75,000 branches
• Operates on a Batch+2 basis
• Same day availability of funds
• Returns within two hours of the settlement
• Highly Secured – smart card based access – PKI security
• Positive confirmation of credits to the originator
• Highly popular – Number of transactions went up from 3.17 mn. during
December 2008 to 13.46 mn. during December 2010
• Processed 13.46 mn. transactions worth Rs. 936.64 bn. during
December 2010
• Processed a record 1.07 mn. transactions on a single day – January 31,
2010
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NEFT – By amount
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Real Time Gross Settlement (RTGS)
•
•
•
•
•
For remitting large value payments
Credit on real time basis
Minimum amount limit – Rs. 2 lakh
Centralised processing at Mumbai
Covers 74,000 branches
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Alternate Payment Channels
ATMs
 68,000+ ATMs
 Avg. daily turnover – 11 mn transactions of ` 30 bn
 National Infrastructure – NFS operated by
NPCI – Largest network, covers 98% of
ATMs
 Customer Service Issues –
 Withdrawal from any bank ATM made free
up to 5 times a month
 Timely resolution of complaints / penalty
 Standardised template for complaints
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Alternate Payment Channels…
Points of Sale
Growth in POS Terminals
 0.55 mn terminals
 Avg. Daily Volume : 1.5 mn.
550
Value : Rs. 3.20 bn.
up to Rs. 1,000 using Debit
cards
Number in '000s
 Cash withdrawal permitted
500
450
400
350
300
250
200
150
100
50
0
Sep, 08
Sep, 09
Sep, 10
Forward Looking
 Possibility of IndiaCard
by NPCI
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Alternate Payment Channels
Mobile Banking
 Enables money transfer and mcommerce transactions through Mobile
phones
 Implemented the bank-led model in
October 2008 subject to certain limits
 Fund transfer for maximum Rs. 50,000
 Beneficiary can receive funds up to
Rs. 5,000 even without having a bank
account with max. of Rs. 25,000 in a
month
 Approval granted to 40 banks
 Monthly Volume : 0.50 mn
 Monthly Value : Rs. 0.44 bn
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Alternate Payment Channels…
Pay before (Pre-paid Cards)
 Guidelines issued in April 2009
 Broadly classified into –
(i) Open (cash withdrawal permitted);
(ii) Semi-closed (no cash withdrawal)
 Non-banks – Only semi-closed;
funds need to be placed in Escrow
Account; Maximum cap – Rs. 50,000
 28 banks and 16 non-banks given approval
DPSS,Trail
RBI
Gives better Audit
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Electronic retail payment systems – By value
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RBI Initiatives
•
•
•
•
•
•
•
Introduction of various Electronic Payment Products
Enhancing the reach of these products
Constantly improving these products
Creating awareness among the public about these products
Setting benchmarks for participants
Authorisation of Prepaid cards for toll and other payments
Approval for issue of cards by government departments /
financial institutions to users
• Rationalization of RTGS / NEFT charges levied by the
banks
• Waving of processing charges
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RBI Initiatives
• Processing inward transactions based solely on account
number
• Furnishing details in pass books / account statement of
customers to help them in clearly identifying the source of
funds / debits
• Uniform penal interest rate prescribed for delay in crediting
customers account or in returning the transactions – RBI
LAF Repo rate + two percent.
• Guidelines issued for bringing RRBs under NEFT umbrella
• Set up Customer Facilitation Centres (CFCs) and placing
details on banks’ websites
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Present status in the country and the North
Eastern states
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Satellite Connectivity Scheme
• To provide satellite connectivity in the North Eastern
Region and encourage banks to bring more branches
under CBS – Implemented effective from April 2009
• RBI provides to branches and off-site ATMs of banks,
State Co-operative and RRBs 100% subsidy subject to
maximum of Rs. 12,000 per month, per branch for
providing connectivity to their branches provided they
offer electronic fund transfer service free of cost
• Banks eligible for subsidy for three years
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Branch coverage
NEFT NECS RTGS ATMs
All India
NE (6 States)
Assam
February 9, 2011
74687 50595 73876 67591
525
308
609
387
1114
579
1093
1007
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Share of NE States in NECS
• Inward transactions for NE (6) states and
Assam for the month of January 2011 are
1302 and 5897 respectively out of total 2.69
mn. transactions
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Roadmap for implementation in North Eastern
states for Government transactions
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Possible Channels
•
•
•
•
RECS
NEFT
Mobile Banking
Prepaid Payment Instruments
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RECS – Process Flow
Sponsor Banks
SBI
Imphal
SBI
Agartala
UBI
Itanagar
SBI RECS Service Centre
UBI
Dispur
UBI RECS Service Centre
Secure Web
Server (SWS)
DAD Guwahati
Processing
NCC, GUW
SWS
IDBI RECSSC
BOB RECSSC
CITI RECSSC
UBI RECSSC
YES RECSSC
Destination Banks
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Participation Essentials
•
•
•
•
•
Account with RBI / Commercial Banks
Details of beneficiaries
Process re-engineering
Checks and balances
Training
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Discussion Points
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