rbiIn its recently released report on ‘Payment Systems in India – Vision 2009-12‘, the Reserve Bank of India has discussed initiatives it has taken and what it plans to do to improve security of cards, make ATMs more accessible to the public, make banking more accessible to the public, improve its efficiency, timings and reduce risks. It notes that the future is in mobile payments and offers its outlook on alternate methods to improve the Indian payments industry. Keeping in mind that e-commerce is a key driver for the digital space in India, the RBIs outlook is an indication of changes that can be expected in the next few years:

Major Projects Envisioned In The Next 1-3 Yrs

— National Infrastructure For Mobile Payments: RBI expects mobiles to emerge as an important channel for payment instructions and intends to ensure real-time m-payments are facilitated using a nation-wide infrastructure.

— India’s Own VISA: RBI is mulling the concept of a domestic payment card association and debit and credit cards to be called India Cards to reduce costs borne by Indian banks to international card associations. It has also noted that the implementation of a Point of Sales (SoS) switch in the country would eliminate the need to route domestic transactions through a switch located outside India, which is what happens currently. Domestic transactions account for 90% of total banking transactions in India.

— Stricter Authorisation Of Payment Systems: RBI will regulate all payment systems in operation and authorise any new ones only if it passes an efficiency assessment: need, technology to be used, benefits to the economy, expertise of the operator, financial soundness, composition of management, adherence to corporate governance, compliance with legal / regulatory guidelines. RBI will refuse authorisation and close any payment firms if the need for them is not felt or their operations are not satisfactory.

RBI plans to place on its website the names of authorised payment firms and the conditions of authorisation to which they are subject. It will also publish the Red Book on Payment Systems for India in collaboration with CPSS-BIS and a Second Report on Oversight of Payment Systems in India (the First was published in 2007).

— Settle Online Payments In 2 Days: Business Standard reports another regulation by RBI that all online payments towards products or services should be settled by the banks within 2 days of the transaction taking place.

— Promotion Of E-Payments, Encouraging Users & E-Governance: The report states electronic products like RTGS (Real Time Gross Settlement), NEFT (National Electronic Funds Transfer) and NECS (National Electronic Clearing Service) will be extended to cover all the branches of banks, including Regional Rural Banks. All large-value and time-critical payments will be processed only through the electronic mode. To encourage users, positive acknowledgements to remitters confirming credit to the beneficiary’s account for transactions initiated in NEFT will be introduced. All credits arising out of sponsored and welfare schemes of the Central and State Governments shall be facilitated through Electronic Benefit Transfer schemes.

— Upgrade of Real Time Gross Settlement system for improved technological support of funds transfer mechanism between banks. RTGS system is currently suited for low-volume, high-value transactions.

— Computerisation: Magnetic Media Based Clearing System software will be used to computerise processing and settlement operations at all Clearing Houses in the country.

— Cheque Truncation System (CTS) , an electronic method of processing cheques will be rolled out at Chennai. National roll-out of CTS will be considered once this project is operationalised.

— 24×7 banking: For those of us who have wondered when true 24×7 banking will arrive, RBI may bring good news. It is considering extending the National Electronic Fund Transfer system from its current operating timings of 9 am to 5 pm and Saturdays from 9 am to 12 pm to a 24×7 availability mode or develop a new system similar to UK’s Faster Payments Service which operates on a 24×7 basis. This is being called India Moneyline.

— Data Storage Policy: As part of the Information System Policy framework, RBI is working on a policy for preservation and storage of data / information generated and maintained both in respect of the paper and electronic clearing modes.

— Umbrella Org For Retail Payment Activity: RBI will finalise the roadmap for National Payments Corporation of India (NPCI), which has been set-up as an umbrella organisation by the banking community to take over the retail payment system activities in the country.

— Cheques To Be Standardised: Using OCR (Optical Character Recognition) capture of information contained in the cheques, RBI expects to reduce incidence of frauds and limit manual intervention through straight-through-processing.

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