Page 110 - DMGT303_BANKING_AND_INSURANCE

Unit 5: Payment and Settlement System

6.2 Authorisation of payment systems Notes
6.2.1 Notification of the Payment and Settlement Systems Act, 2007 empowers the Bank to
regulate and oversee all payment systems. The existing and proposed payment systems
will need to obtain authorisation from the Bank to continue/commence operations. The
central bank is expected to lay down operational and technical standards for the functioning
of these systems, empowered to issue directions, call for information/returns, revoke
authorisation and impose penalties/initiate prosecution proceedings for violations of the
Act, the Regulations, the directions issued by it and the terms and conditions of
authorisation.

6.2.2 For the purpose the Bank shall –
Bring all payment systems in operation in the country under its regulatory purview.
Authorise new payment systems and operators of payment systems only if they add
efficiency, increase customer convenience, expand the outreach and bring in
improvements to the payment system scope and activities in the country. Assessment
will be made vis-a-vis efficiency parameters like 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, etc.

Refuse authorisation and revoke authorization of payment systems if the need
therefor is not felt or their operations are not satisfactory. This will be done in a
transparent manner and in accordance with the provisions of the Act.

6.3 Smooth functioning of existing payment systems
6.3.1 Endeavour will be to ensure that the systems authorised to operate function in a smooth
and non-disruptive manner. This would be achieved by –

Streamlining access criteria prescriptions for all retail and large value payment
systems like MICR, ECS/NECS, NEFT and RTGS. The existing access criteria
parameters will be constantly reviewed and modified, wherever necessary.
Ensuring redundancies to handle business continuity requirements. The redundancies
in the form of additional/alternate arrangements will address both processing and
settlement requirements. Periodic assessment by way of conducting drills, switch-
over of the operations/settlements will be carried out and business continuity plans
will be documented and suitably modified.
Putting in place appropriate mechanism for on-site inspections/off-site surveillance.
6.3.2 Banks need to indicate in their Cheque Collection Policies (CCPs) the time frame for
collection of local and outstation cheques, apart from other aspects advised to them from
time to time. The CCPs need to be widely publicised and also published in the respective
banks’ websites. The CCPs framed by banks will be made comprehensive in terms of
scope, coverage, transparency and dissemination. It will be ensured that banks strictly
operate within the meaning and intent of the CCPs especially in regard to time frame for
collection, grievance redressal mechanism and penalties for non- conformity.

6.3.3 In addition to the time frame specified for collection of US-Dollar Denominated
Instruments, guidelines will be framed and advised for collection of foreign-currency
denominated cheques payable in UK and/or locations that have significant volumes.
6.3.4 Charges levied for offering various payment products will be constantly reviewed and
appropriate interventions will be considered if the charge-structure is found to be non-
transparent or unreasonable.

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