Page 114 - DMGT303_BANKING_AND_INSURANCE

Unit 5: Payment and Settlement System

India MoneyLine – A 24x7 system for one-to-one funds transfers – The existing NEFT Notes
system operates during weekdays from 9 am to 5 pm and on Saturdays from 9 am to
12 noon. The Bank would pursue the suggestion to consider the need to extend NEFT
to function on a 24x7 basis or to develop a new system akin to the Faster Payments
Service in the UK which operates on a 24x7 basis.
India Card – A domestic card initiative – The concept of a domestic payment card
(India Card) and a PoS switch network for issuance and acceptance of payment cards
would be looked into. The need for such a system arises from two major considerations
(a) the high cost borne by the Indian banks for affiliation with international card
associations in the absence of a domestic price setter and (b) the connection with
international card associations resulting in the need for routing even domestic
transactions, which account for more than 90% of the total, through a switch located
outside the country.

Redesigning ECS to function as a true Automated Clearing House (ACH) for bulk transactions
– Currently, Local ECS (to facilitate bulk electronic transactions with one-to-many
and many-to-one variants) is operational at 76 centres. Centralisation of this process
is already underway with the launch of credit variant of NECS at Mumbai (and
RECS on a pilot basis). The debit variant is also being planned for implementation.
The ECS / NECS solution is internally developed and has been in use since long and
the need for building a technology and feature-rich ACH network by totally
redesigning the existing ECS to provide end-to-end processing in a straight-through
manner would be examined.
Mobile payments settlement network – Mobile phones are expected to emerge as an
important channel for transmission of payment instructions. Efficient mobile
payments would require real time transfer of funds with adequate security. Currently
all inter-bank mobile transfers are payment instructions for settling funds through
existing payment systems. This would require building a national infrastructure for
facilitating real time mobile payments.

The India MoneyLine, India Card, ACH and Mobile payments settlement network
initiatives would be taken forward in coordination with the NPCI.

Roadmap for Implementation

The time frame for reaching the various milestones is encapsulated below. The aspects which
would be attended to on an ongoing basis are indicated under the ‘Ongoing’ category.

Ongoing

1. Grant of authorization to operate ‘payment system’ under the Payment and Settlement
Systems Act.
2. Publishing the list of entities authorized under the Payment and Settlement Systems Act,
2007.
3. Oversight of payment systems – including issue of directions, guidelines, minimum
benchmarks, etc., for operating payment systems.
4. Identifying various risks, addressing risk-reduction by putting in place risk- mitigation
measures.

5. Information dissemination, coordination with other regulators / regional bodies, within
the country and abroad.

LOVELY PROFESSIONAL UNIVERSITY 109