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
2


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
3
Payments Systems 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
4


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

5


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


6
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.
7
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
8
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

9
RTGS .. Coverage

11300 Branches of 95 Bankscovering 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.
10
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.

11
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

12
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.
13
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.
14
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.
15
11
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
E
n
c
r
y
p
t
e
d


D
a
t
a

o
n


D
a
y
-
1

16
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
17
Centralised ECS
Available at 15 centres..
Submit data file at one location and get
credit across 15 locations..
Funds transfer on T+2 basis..
18
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
19
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.,

20
Banking Products for ECS Debit
Credit Card payments
Utilities payments .. Telephone, Cell phones,
Electricity bills
Equated Monthly Instalment payments of
personal loans
School fees
21
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
22
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 !!!


23
Thank You..