Payment And Settlements Systems in India – Banking Awareness
Notes
The Reserve Bank of India
is the central bank of India, acts as a regulator of the financial system. In
India, Payment and Settlement are regulated by ‘’The Payment and
Settlement Systems Act, 2007’’ Which provides the authority to RBI for
all payment and settlement related matters. This act also provides the legal
basis for ‘netting’ and ‘settlement finality’.
Under this act two
regulations have been made by RBI, One is, Board for Regulation and
Supervision of Payment and Settlement Systems (BPSS) 2008.This committee is
formed by the central board of directors of RBI. It deals with exercising its
powers, the constitution of subcommittees and advisory committees for payment
and settlement related matters.
Another one is Payment
and Settlement Systems Regulations, 2008. It deals the issues like the
form of application for authorization for commencing on a payment system and
grant of authorization, payment systems, furnishing of returns, documents, the
furnishing of accounts and balance sheets by systems provider etc.
CCIL- Clearing Corporation of India Limited –
- It is an agency which will
extend guaranteed settlement for trades done or reported on NDS in government
securities including Treasury Bills.
- This is used to remove the
effect of credit risk faced by the members who buy securities and sell
securities.
- CCIL provides the additional
comfort of improved risk management practices through daily marking to market
of collateral, maintenance of daily margins by members and through a
guarantee fund.
- Settlement through CCIL will be
done on Delivery Versus Payment II (DVP II) mechanism. It refers to the
settlement of securities on the gross basis while funds will settle on the
net basis.
NEFT –National Electronic Funds Transfer –
- It facilitates, funds can be
transferred electronically from any bank branch to another having an
account with any other bank branch in the country.
- It operates in hourly batches
that mean funds transferred in hourly batches – there is eleven settlement
from 9 am to 7 pm on week days and five settlements from 9 am to 1 pm on
Saturdays.
- There is no minimum or
maximum on a number of funds that could be transferred using
NEFT.
- IFSC –Indian financial system
code is an
alphanumeric code that uniquely identifies a bank-branch participating in
the NEFT system to route the messages to the destination bank or branch.
- 11 digit codes with first 4
alpha characters representing the bank and the last 6 numeric characters
represent the branch.The 5th character is 0.
RTGS – Real Time Gross Settlement –
- It facilitates fund transfer
from one bank to another on real time and on the gross basis.
- Without bunching with any other
transactions, this fund transfer facilitates one to one basis without any
waiting period.
- This is the fastest possible
money transfer system and this system is meant for large value
transactions. The minimum amount to be remitted through RTGS is 2 lakh.
There is no upper limit for RTGS transactions.
- Fund transactions available from
9.00 hours to 16.30 hours on weekdays and from 9.00 hours to 13.30 hours
on Saturdays for settlement.
EFT –Electronic Funds Transfer -
- By this money can transfer from
account to account of any bank branch to any other bank branch in places
where EFT services are offered.
- EFT system presently covers all
the branches of the public sector banks and scheduled commercial banks.
HVC- High-Value Clearing-
- To facilitate faster clearing of
large value cheques (of the value of rupees one lakh and above) RBI
introduce HVC, covering selective branches of banks for same day
settlement.
CTS- Cheque Truncation System-
- It is a Cheque clearing system.
Clearinghouse sends the electronic image of the cheque and related
information to the paying branch to eliminate the flow of physical cheque.
It speeds up the process of collection of cheques.
- It provides more secure
transactions.
- Reduces the scope for clearing
related frauds or loss of instruments in transit.
- Lowers the cost of collection of
cheques.
- Removes the reconciliation
related and logistics-related problems thus benefiting the system as the
whole.
ECS – Electronic clearing Service –
- This uses a series of electronic
payment instructions for transfer of funds instead of paper instruments.
- ECS-Credit – This enables
companies to pay interest or dividend to a large number of beneficiaries
by the direct credit of the amount to their bank accounts.
- ECS- Debit – This facilitates
payment of charges to utility services such as loan instalments,
electricity bill and payment of insurance premium, directly by debit to
the customer’s account with a bank.
NECS-National Electronic Clearing Service –
- It facilitates credits to bank
accounts of multiple customers against a single debit of remitter’s
account.
- NECS (Debit) - launched to
facilitate multiple debts to destination account holders against a single
credit to the sponsor bank.
- The system has a pan India
characteristic leveraging on CBS of member banks, facilitates all CBS bank
branches to participate in the system.
NPCI -National Payment Corporation of India –
- The objective of this newly
established company promoted by banks in India is to build robust and
state of the art national level retail electronic payment system
infrastructure in the country.
- NPCI was incorporated in
December 2008 and the certificate of commencement of business was issued
in April 2009.
