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E-Payment Products based on

Centralised RBI Platforms
By :
Kaza Sudhakar
General Manager
Department of Payment and Settlement Systems
Reserve Bank of India
Bank Card & ePayment
2005
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Constraints Issues

» Geographical spread » Delays in receiving credits

» Low levels of banking automation » Uncertainty of payments

» Inadequate communication » Reconciliation issues

» Gaps in postal infrastructure » High fraud potential

» Administrative Burden

Banking Infrastructure of India
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Payments System’s Vision
• Objective : “To Provide A Safe, Secure,
Sound and Efficient payment and
settlement system for the country”
• Increase Efficiency of the Payments
systems
• Customer Facilitation for each of the
payment system products
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Payment System Developments
• Initiatives driven by the Reserve Bank of India
– Increase in the number of centers offering MICR clearing

– Introduction of High Value Clearing at additional centers

– Electronic Clearing Services - debits and credits

– Electronic Funds Transfers and Special Electronics funds transfer

– Real Time Gross Settlement System (RTGS)

– Cheque Truncation

– NEFT

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Payment System ..RBI Vision
Banks to focus on:

• Senior Management Involvement
• Creating awareness amongst customers
• Create Inter-bank products
• Electronic Delivery Channels- ATMs, Kiosks, Website, etc.,
• Reasonable Pricing
• STP to drive down costs
• Solutions tailored to customers needs


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The Road Blocks
• Attitude
• It is something new.. We are comfortable with
the existing order.
• Failure to think ahead…
• The difficulty in marketing new products.
• The resistance from vested interests and those
interested in the existing order.
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Benefits of RTGS
• Real-time Payment Settlement: Payments settled in real time on a
transaction-by-transaction basis, as soon as they are accepted by
the system.

• No Credit Risk :- There is no credit and settlement risk involved in
RTGS system for receiving participant as each payment transaction
is settled instantly.

• Predictability of Cash Flows:- RTGS facilitates predictability of cash
flows as customers know when their accounts will be debited or
credited.

• Benefits to Economy : The instant finality of payments ensures fast,
secure and irrevocable settlement of major business and financial
market transactions
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Issues relating to growth in RTGS…
• Awareness..
-Create independent counter at branches..
-Create user friendly delivery channels and offer dedicated
products through….
>a robust website
>a kiosk
>an ATM
>or menu driven user friendly interface at the banks
branches.
• Charges..
-Some of the banks have reduced charges
substantially..Rs.25 to Rs.50 per transaction

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RTGS .. Coverage

• 11300 Branches of 95 Banks…covering 508 Clearing Centres. Nearly
800 cities/towns covered.
• 79 Banks offering Customer Transactions
• Delivery Channels to reach the different categories…
-- Website
-- ATMs
-- Kiosks
• RTGS should be extended to all the CBS / AWB branches.
• Customers desire RTGS facility at an affordable price.
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EFT and SEFT
…net settlement system
• Electronic Funds Transfer (EFT) and
Special Electronic Funds Transfer (SEFT)
facilitate paperless inter and intra-bank
settlements; both inter and intra-city.
• There is no Maximum value limit for an
individual SEFT/ EFT transaction.
• EFT is available at 15 locations: Mumbai,
Kolkata, New Delhi, Chennai, Bangalore,
Hyderabad, Ahmedabad, Chandigarh,
Trivandrum, Jaipur, Nagpur, Guwahati,
Bhubhaneshwar, Patna and Kanpur.

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EFT and SEFT
• SEFT participation is voluntary and participating banks
have discretion to define branches that can participate in
SEFT
• SEFT covers approximately 3200 networked branches of
35 banks in over 180 cities (currently).
• Two Settlements every day from November 2, 2005
• 10.30am – 3.00 pm
• Working Group on EFT for Capital Markets

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Some EFT Products
• EFT for crediting Merchant Establishments of Credit Cards, Point of Sale,
Smart Cards.

• Corporates crediting Suppliers through EFT. Railways and Defense Suppliers
credits.

• Routing Foreign credits to beneficiaries in India.

• Cash Management Product Beneficiaries Credits.

• EFT interface on internet allows customers freedom to credit beneficiaries in
other banks without visiting their bank

• Banks having EDI interface with Govt. Departments say for example
Customs, can credit payments like duty drawback etc., into accounts of
other banks instead of giving pay orders.
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Some EFT Products
• The Govt. Departments can also be credited
through EFT from various banks.

• Some Government Bodies like DGFT receive
license fees from lakhs of exporters, which can
be done through EFT.

• The analogy can be extended to pvt. Companies
which receive payments from lakhs of
dealers/franchisees.
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Local ECS…
• Available at the 44 Clearing Centre.
• (15 RBI Centres, 23 SBI Centres, 2 PNB, 1
Union Bank, 1 Corp Bank, 1 Andhra Bank
and 1 SB of Indore)
• Funds transfer on T+2 basis..
• Available for Credit as well as Debit.
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How ECS Works - Process flow
User Institution
Beneficiaries’
A/Cs
Destination banks’
service branches
Destination
branches
Clearing
House
Sponsor Bank
Data on Day-
1
Reports on Day-1
Reports on Day-1
Credit on Day-2
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ECS - Processing of Uncredited Payment
Instructions contd...
User Institution
Destination banks’
service branches
Destination
branches
Clearing
House
Sponsor Bank
Encrypted Output Data on
Post Settlement
Day-1

Return Data submitted on
Post Settlement
Day-1
Return Advice on Post Settlement Day-1
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Centralised ECS…
• Available at 15 centres..
• Submit data file at one location and get
credit across 15 locations..
• Funds transfer on T+2 basis..
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Banking Products based on ECS
• ECS Credit
• Corporate users credit Dividend, Interest and other types
of warrants.
• RBI uses ECS credit for crediting RBI bonds interest to
the bond holders.
• Most Corporates and Govt. Departments use ECS credit
for Salary credit
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Banking Products – ECS Credit..
• Monthly payments to Suppliers etc.,
• Merchant Establishments for Credit Cards,
Smart Cards and Point of Sale debit cards.
• Pension Payments of big Govt. Depts. like
Defence, Railways etc.,

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Banking Products for ECS Debit
• Credit Card payments
• Utilities payments .. Telephone, Cell phones,
Electricity bills
• Equated Monthly Instalment payments of
personal loans
• School fees
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Banking Products for ECS
Credibility issues in ECS debit solved by
internet. The customer first validates the
bill through Internet and thereafter the
User releases the ECS Debit
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What Corporates Should Do…????
• Analyse the payments and receipt stream
• Identify the payments for each type of product.
(RTGS, SEFT, ECS and EFT)
• Put a mechanism in place for receipts and
payments.
• Demand the Required Products from
your Bank !!!


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Thank You..