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Seminar on Reduction / Elimination of Cash in Government Transactions

This seminar organized by the Reserve Bank of India's Department of Payment & Settlement Systems will provide an overview of electronic payment systems and discuss the current status and roadmap for implementing these systems in government transactions, with a focus on the North Eastern states.

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Seminar on Reduction / Elimination of Cash in Government Transactions

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  1. Seminar onReduction / Elimination of Cash in Government Transactions Reserve Bank of India Dept. of Payment & Settlement Systems Central Office, Mumbai

  2. Presentation Structure • Overview of Payment & Settlement Systems • Introduction to Electronic Payment Systems • Present status in the country and the North Eastern states • Roadmap for implementation in North Eastern states for Government transactions DPSS, RBI

  3. Overview of Payment & Settlement Systems DPSS, RBI

  4. Payment System “A set of instruments, procedures and rules for the transfer of funds • between or among participants, as well as the entity operating the arrangement • typically based on an agreement between or among participants and the Financial Market Infrastructure • transfer of funds is effected using an agreed-upon technical infrastructure” DPSS, RBI

  5. Legal Basis Payment and Settlement Systems Act, 2007 BPSS the apex body No payment system to operate without authorisation RBI as the regulator and supervisor Legal basis for Netting Dishonor of electronic debit instruction on par with Cheque Directives Issued Settlement and Default Handling Procedures Dispute Resolution framework DPSS, RBI

  6. Mission • “To ensure that all the payment and settlement systems operating in the country are Safe, Secure, Sound, • Efficient, Accessible and Authorised". DPSS, RBI

  7. Payment Systems – Major Milestones HV Close / Directives on Settlement, Defaults and Disputes 2010 RECS / Pre-paid / CPSS Member 2009 2008 PSS ACT 2007 CTS / NECS / Mobile / NPCI / Act Notification RTGS 2005 2004 DPSS / NEFT / NFS IT ACT 2002 EFT / IDRBT 2000 CCIL 1999 1994 MICR INFINET 1992 ECS 1986 DPSS, RBI

  8. Payment Systems DPSS, RBI

  9. Payment Systems – By volume DPSS, RBI

  10. Payment System – By value DPSS, RBI

  11. Introduction to Electronic Payment Systems DPSS, RBI

  12. Electronic Payment Systems (EPS) • Simpler • Safer • Faster • Cost Effective • Enhanced Reach • Eco-friendly DPSS, RBI

  13. Why EPS DPSS, RBI

  14. EPS – Benefits • Individuals Beneficiaries – • Funds in on the due date • Bills / EMIs paid automatically • No frequent writing of cheques / standing in the queue • Govt. Departments / Corporates • Instruction based • Direct payment / receipt on due date / time • Easy Reconciliation • Cost effective • No interaction between payer and payee DPSS, RBI

  15. EPS - Variants • Electronic Clearing Service (ECS) • ECS – Credit and Debit • National ECS • Regional ECS – Credit and Debit • National Electronic Funds Transfer (NEFT) • Real Time Gross Settlement (RTGS) • Alternate Payment Channels • Internet Banking • ATMs • Mobile Banking • Pre-paid Payment Instruments DPSS, RBI

  16. Electronic Clearing Service (ECS) • Used for bulk transfers – repetitive payments or receipts • Disbursement of funds – from one source to many beneficiaries – called Credit • Collection of funds – to one beneficiary from many customer s – called Debit • Operates on a T+1 basis • Available at 90 major locations • Geographical restriction – confined to cover local Clearing House only DPSS, RBI

  17. ECS – Users • All prominent listed companies on exchanges • Used for • Salaries • Vendor Payments • Dividends • IPO / FPO refunds • Bill Collections (Telephone, Electricity, Water), EMIs, School / Exam fee collection etc. • Handled 16.7 mn transactions for value Rs 253.51 bn during October 2010 DPSS, RBI

  18. National ECS • Credit Clearing introduced in September 2008 • Centralised processing at Mumbai • Covers about 52,000 branches • File acceptance timings extended till 6.30 pm • Processes around 75% of total ECS Credit volumes • Handled 2.6 mn. transactions in a single day DPSS, RBI

  19. Regional ECS (RECS) Credit and Debit Variants at Ahmedabad, Bangalore, Bhubaneshwar, Chennai, Kolkata – Since launched Guwahati, Hyderabad and Jaipur – Ready for implementation Bhopal, Kanpur, New Delhi, Nagpur and Patna – Being planned DPSS, RBI

  20. National Electronic Funds Transfer (NEFT) • NEFT facilitates one-to-one funds transfers between banks, irrespective of location • Eleven Hourly Settlements from 9 am to 7 pm • Covers 101 banks and about 75,000 branches • Operates on a Batch+2 basis • Same day availability of funds • Returns within two hours of the settlement • Highly Secured – smart card based access – PKI security • Positive confirmation of credits to the originator • Highly popular – Number of transactions went up from 3.17 mn. during December 2008 to 13.46 mn. during December 2010 • Processed 13.46 mn. transactions worth Rs. 936.64 bn. during December 2010 • Processed a record 1.07 mn. transactions on a single day – January 31, 2010 DPSS, RBI

  21. DPSS, RBI

  22. NEFT – By amount DPSS, RBI

  23. Real Time Gross Settlement (RTGS) • For remitting large value payments • Credit on real time basis • Minimum amount limit – Rs. 2 lakh • Centralised processing at Mumbai • Covers 74,000 branches DPSS, RBI

  24. 68,000+ ATMs Avg. daily turnover – 11 mn transactions of ` 30 bn National Infrastructure – NFS operated by NPCI – Largest network, covers 98% of ATMs Customer Service Issues – Withdrawal from any bank ATM made free up to 5 times a month Timely resolution of complaints / penalty Standardised template for complaints Alternate Payment Channels ATMs DPSS, RBI

  25. Alternate Payment Channels… Points of Sale • 0.55 mn terminals • Avg. Daily Volume : 1.5 mn. Value : Rs. 3.20 bn. • Cash withdrawal permitted up to Rs.1,000 using Debit cards • Forward Looking • Possibility of IndiaCard by NPCI DPSS, RBI

  26. Enables money transfer and m-commerce transactions through Mobile phones Implemented the bank-led model in October 2008 subject to certain limits Fund transfer for maximum Rs. 50,000 Beneficiary can receive funds up to Rs. 5,000 even without having a bank account with max. of Rs. 25,000 in a month Approval granted to 40 banks Monthly Volume : 0.50 mn Monthly Value : Rs. 0.44 bn Alternate Payment Channels Mobile Banking DPSS, RBI

  27. Pay before (Pre-paid Cards) Guidelines issued in April 2009 Broadly classified into – (i) Open (cash withdrawal permitted); (ii) Semi-closed (no cash withdrawal) Non-banks – Only semi-closed; funds need to be placed in Escrow Account; Maximum cap – Rs.50,000 28 banks and 16 non-banks given approval Alternate Payment Channels… Gives better Audit Trail DPSS, RBI

  28. Electronic retail payment systems – By value DPSS, RBI

  29. RBI Initiatives • Introduction of various Electronic Payment Products • Enhancing the reach of these products • Constantly improving these products • Creating awareness among the public about these products • Setting benchmarks for participants • Authorisation of Prepaid cards for toll and other payments • Approval for issue of cards by government departments / financial institutions to users • Rationalization of RTGS / NEFT charges levied by the banks • Waving of processing charges DPSS, RBI

  30. RBI Initiatives • Processing inward transactions based solely on account number • Furnishing details in pass books / account statement of customers to help them in clearly identifying the source of funds / debits • Uniform penal interest rate prescribed for delay in crediting customers account or in returning the transactions – RBI LAF Repo rate + two percent. • Guidelines issued for bringing RRBs under NEFT umbrella • Set up Customer Facilitation Centres (CFCs) and placing details on banks’ websites DPSS, RBI

  31. Present status in the country and the North Eastern states DPSS, RBI

  32. Satellite Connectivity Scheme • To provide satellite connectivity in the North Eastern Region and encourage banks to bring more branches under CBS – Implemented effective from April 2009 • RBI provides to branches and off-site ATMs of banks, State Co-operative and RRBs 100% subsidy subject to maximum of Rs. 12,000 per month, per branch for providing connectivity to their branches provided they offer electronic fund transfer service free of cost • Banks eligible for subsidy for three years DPSS, RBI

  33. Branch coverage DPSS, RBI

  34. Share of NE States in NECS • Inward transactions for NE (6) states and Assam for the month of January 2011 are 1302 and 5897 respectively out of total 2.69 mn. transactions DPSS, RBI

  35. Roadmap for implementation in North Eastern states for Government transactions DPSS, RBI

  36. Possible Channels • RECS • NEFT • Mobile Banking • Prepaid Payment Instruments DPSS, RBI

  37. RECS – Process Flow Sponsor Banks SBI Imphal SBI Agartala UBI Itanagar UBI Dispur SBI RECS Service Centre UBI RECS Service Centre Secure Web Server (SWS) Processing NCC, GUW DAD Guwahati SWS IDBI RECSSC BOB RECSSC CITI RECSSC UBI RECSSC YES RECSSC Destination Banks DPSS, RBI

  38. Participation Essentials • Account with RBI / Commercial Banks • Details of beneficiaries • Process re-engineering • Checks and balances • Training DPSS, RBI

  39. Discussion Points DPSS, RBI

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