RBI to make electronic transfer mandatory

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Mumbai, Feb 19: The Reserve Bank of India has proposed to make all large value payments of Rs one crore and above through electronic payment mechanism from April 1.

In an approach paper released here on Monday, the RBI said that such transfer would cover all payment transactions of Rs one crore and above between the RBI regulated entities such as banks, Primary Dealers and the NBFCs, besides RBI regulated markets such as money market, government securities market and foreign exchange market would also be brought under electronic payment mechanism.

RBI said moving such large payments from an unsecured paper-based system to a fully secure electronic credit push system would reduce credit and settlement risks from having large value retail payments being made by paper instruments, bring greater efficiency by moving large value retail payments to electronic mode, increasing customer convenience, reducing the transaction cost for the banks (which in turn can be passed on to customers) RBI has sought comments on the proposal from the general public.

In many developed countries, the percentage growth of cheques as mode of payment has been negative for last few years. But in India, the cheque volume continues to grow with a positive growth rate, inspite of more than 33 per cent growth rate (in 2006-2007 over 2005-2006) by volume in electronic transactions.

RBI has already put in place three modes of electronic payments such as the Real Time Gross Settlement, for a minimum transaction of Rs one lakh under which 40,000 bank branches have been enable to put through transactions, National Electronic Fund Transfer (NEFT) for settlement in batch process settlements a day on week days and three settlements on Saturday under which more than 39,000 bank branches were enabled to put through transactions in the system and the Electronic Clearing System (ECS) Netted settlement for bulk transactions of repetitive nature (dividend, salary, pension payments, refunds, vendor payments), at 70 centres.

RBI based on a suggestion of an internal working group which had been examining these electronic payment and suggested their implementation in a phased manner had been in regular touch with banks and based on the feedback received in expanding the coverage, rationalisation of systems and procedure and upgrading the technology infrastructure steps are being taken to strengthen these systems During last few months several rounds of discussions with banks had been held and symposia had been organised at several places in the country.

The access points to provide RTGS and NEFT system was growing at the rate of about 1500 additional branches every month and RBI expect the number of access points to increase further in the next few months for both RTGS and NEFT. A study reveals that the daily average number of cheques for Rs one crore and above being used by all entities at four metropolitan centres for the three months (October-December 2007) was around 2100 valued at Rs.14,800 crore.

Since four metro centres account for bulk of large value payments (as evident from the cheque clearing data), the likely volume of cheques Rs one crore and above may not be very large for the whole country the RBI found that the additional volume could be comfortably handled in the RTGS or NEFT or ECS infrastructure.


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