E-Payment Products E-Payment Products based on Centralised RBI based on Centralised RBI

PlatformsPlatformsBy :By :

Kaza SudhakarKaza Sudhakar

General ManagerGeneral Manager

Department of Payment and Settlement Department of Payment and Settlement SystemsSystems

Reserve Bank of IndiaReserve Bank of India

Bank Card & ePayment 2005

Bank Card & ePayment 2005

22

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 Banking Infrastructure of IndiaIndia

33

Payments System’s Payments System’s VisionVision

• Objective : “To Provide A Safe, Objective : “To Provide A Safe, Secure, Sound and Efficient payment Secure, Sound and Efficient payment and settlement system for the and settlement system for the country”country”

• Increase Efficiency of the Payments Increase Efficiency of the Payments systemssystems

• Customer Facilitation for each of the Customer Facilitation for each of the payment system productspayment system products

44

Payment System Payment System DevelopmentsDevelopments

• Initiatives driven by the Reserve Bank of Initiatives driven by the Reserve Bank of IndiaIndia– Increase in the number of centers offering MICR clearingIncrease in the number of centers offering MICR clearing

– Introduction of High Value Clearing at additional centersIntroduction of High Value Clearing at additional centers

– Electronic Clearing Services - debits and creditsElectronic Clearing Services - debits and credits

– Electronic Funds Transfers and Special Electronics funds transferElectronic Funds Transfers and Special Electronics funds transfer

– Real Time Gross Settlement System (RTGS)Real Time Gross Settlement System (RTGS)

– Cheque TruncationCheque Truncation

– NEFTNEFT

55

Payment System ..RBI Payment System ..RBI VisionVision

Banks to focus on:Banks to focus on:

• Senior Management InvolvementSenior Management Involvement• Creating awareness amongst customersCreating awareness amongst customers• Create Inter-bank productsCreate Inter-bank products• Electronic Delivery Channels- ATMs, Kiosks, Electronic Delivery Channels- ATMs, Kiosks,

Website, etc.,Website, etc.,• Reasonable PricingReasonable Pricing• STP to drive down costsSTP to drive down costs• Solutions tailored to customers needsSolutions tailored to customers needs

  

66

The Road BlocksThe Road Blocks

• Attitude Attitude

• It is something new.. We are comfortable It is something new.. We are comfortable with the existing order.with the existing order.

• Failure to think ahead…Failure to think ahead…

• The difficulty in marketing new products.The difficulty in marketing new products.

• The resistance from vested interests and The resistance from vested interests and those interested in the existing order.those interested in the existing order.

77

Benefits of RTGSBenefits of RTGS

• Real-time Payment Settlement: Payments settled in real Real-time Payment Settlement: Payments settled in real time on a transaction-by-transaction basis, as soon as they time on a transaction-by-transaction basis, as soon as they are accepted by the system.are accepted by the system.

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

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

• Benefits to Economy : The instant finality of payments Benefits to Economy : The instant finality of payments ensures fast, secure and irrevocable settlement of major ensures fast, secure and irrevocable settlement of major business and financial market transactions business and financial market transactions

88

Issues relating to growth in Issues relating to growth in RTGS…RTGS…

• Awareness..Awareness..-Create independent counter at branches..-Create independent counter at branches..-Create user friendly delivery channels and offer -Create user friendly delivery channels and offer

dedicated products through….dedicated products through….>a robust website>a robust website>a kiosk >a kiosk >an ATM >an ATM >or menu driven user friendly interface at the >or menu driven user friendly interface at the

banks branches.banks branches.• Charges..Charges..-Some of the banks have reduced charges -Some of the banks have reduced charges

substantially..Rs.25 to Rs.50 per transactionsubstantially..Rs.25 to Rs.50 per transaction

99

RTGS .. CoverageRTGS .. Coverage

• 11300 Branches of 95 Banks…covering 508 Clearing 11300 Branches of 95 Banks…covering 508 Clearing Centres. Nearly 800 cities/towns covered.Centres. Nearly 800 cities/towns covered.

• 79 Banks offering Customer Transactions79 Banks offering Customer Transactions• Delivery Channels to reach the different categories…Delivery Channels to reach the different categories…-- Website-- Website-- ATMs-- ATMs-- Kiosks-- Kiosks• RTGS should be extended to all the CBS / AWB branches.RTGS should be extended to all the CBS / AWB branches.• Customers desire RTGS facility at an affordable price.Customers desire RTGS facility at an affordable price.

1010

EFT and SEFTEFT and SEFT…net settlement system…net settlement system

• Electronic Funds Transfer (EFT) and Electronic Funds Transfer (EFT) and Special Electronic Funds Transfer (SEFT) Special Electronic Funds Transfer (SEFT) facilitate paperless inter and intra-bank facilitate paperless inter and intra-bank settlements; both inter and intra-city.settlements; both inter and intra-city.

• There is no Maximum value limit for an There is no Maximum value limit for an individual SEFT/ EFT transaction.individual SEFT/ EFT transaction.

• EFT is available at 15 locations: EFT is available at 15 locations: Mumbai, Kolkata, New Delhi, Chennai, Mumbai, Kolkata, New Delhi, Chennai, Bangalore, Hyderabad, Ahmedabad, Bangalore, Hyderabad, Ahmedabad, Chandigarh, Trivandrum, Jaipur, Nagpur, Chandigarh, Trivandrum, Jaipur, Nagpur, Guwahati, Bhubhaneshwar, Patna and Guwahati, Bhubhaneshwar, Patna and KanpurKanpur..

1111

EFT and SEFTEFT and SEFT

• SEFT participation is voluntary and participating SEFT participation is voluntary and participating banks have discretion to define branches that can banks have discretion to define branches that can

participate in SEFT participate in SEFT • SEFT covers approximately 3200 networked SEFT covers approximately 3200 networked

branches of 35 banks in over 180 cities branches of 35 banks in over 180 cities (currently). (currently).

• Two Settlements every day from November 2, Two Settlements every day from November 2, 20052005

• 10.30am – 3.00 pm 10.30am – 3.00 pm • Working Group on EFT for Capital MarketsWorking Group on EFT for Capital Markets

1212

Some EFT Some EFT ProductsProducts

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

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

• Routing Foreign credits to beneficiaries in India.Routing Foreign credits to beneficiaries in India.

• Cash Management Product Beneficiaries Credits.Cash Management Product Beneficiaries Credits.

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

• Banks having EDI interface with Govt. Departments say for example Banks having EDI interface with Govt. Departments say for example Customs, can credit payments like duty drawback etc., into accounts of Customs, can credit payments like duty drawback etc., into accounts of other banks instead of giving pay orders.other banks instead of giving pay orders.

1313

Some EFT ProductsSome EFT Products

• The Govt. Departments can also be The Govt. Departments can also be credited through EFT from various banks. credited through EFT from various banks.

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

• The analogy can be extended to pvt. The analogy can be extended to pvt. Companies which receive payments from Companies which receive payments from lakhs of dealers/franchisees. lakhs of dealers/franchisees.

1414

Local ECS…Local ECS…• Available at the 44 Clearing Centre.Available at the 44 Clearing Centre.

• (15 RBI Centres, 23 SBI Centres, 2 (15 RBI Centres, 23 SBI Centres, 2 PNB, 1 Union Bank, 1 Corp Bank, 1 PNB, 1 Union Bank, 1 Corp Bank, 1 Andhra Bank and 1 SB of Indore)Andhra Bank and 1 SB of Indore)

• Funds transfer on T+2 basis..Funds transfer on T+2 basis..

• Available for Credit as well as Debit.Available for Credit as well as Debit.

151511

How ECS Works - Process flowHow ECS Works - Process flow

User InstitutionBeneficiaries’

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

Enc

rypt

ed

Dat

a on

Day

-1

1616

ECS - Processing of Uncredited Payment ECS - Processing of Uncredited Payment Instructions contd...Instructions contd...

User Institution

Destination banks’service branches

Destination branches

Clearing HouseSponsor Bank

Encrypted Output Data on Post Settlement

Day-1

Return Data submitted on Post Settlement

Day-1

Return Advice on Post Settlement Day-1

Enc

rypt

ed O

utpu

t D

ata

on

Pos

t Set

tlem

ent

Day

-2

1717

Centralised ECS…Centralised ECS…• Available at 15 centres..Available at 15 centres..

• Submit data file at one location and Submit data file at one location and get credit across 15 locations..get credit across 15 locations..

• Funds transfer on T+2 basis..Funds transfer on T+2 basis..

1818

Banking Products based on Banking Products based on ECSECS

• ECS CreditECS Credit

• Corporate users credit Dividend, Interest and Corporate users credit Dividend, Interest and other types of warrants.other types of warrants.

• RBI uses ECS credit for crediting RBI bonds RBI uses ECS credit for crediting RBI bonds interest to the bond holders.interest to the bond holders.

• Most Corporates and Govt. Departments use ECS Most Corporates and Govt. Departments use ECS credit for Salary creditcredit for Salary credit

1919

Banking Products – ECS Credit..Banking Products – ECS Credit..

• Monthly payments to Suppliers etc.,Monthly payments to Suppliers etc.,

• Merchant Establishments for Credit Merchant Establishments for Credit Cards, Smart Cards and Point of Sale Cards, Smart Cards and Point of Sale debit cards.debit cards.

• Pension Payments of big Govt. Depts. Pension Payments of big Govt. Depts. like Defence, Railways etc.,like Defence, Railways etc.,

2020

Banking Products for ECS Banking Products for ECS DebitDebit

• Credit Card paymentsCredit Card payments

• Utilities payments .. Telephone, Cell Utilities payments .. Telephone, Cell phones, Electricity billsphones, Electricity bills

• Equated Monthly Instalment payments of Equated Monthly Instalment payments of personal loanspersonal loans

• School fees School fees

2121

Banking Products for Banking Products for ECSECS

Credibility issues in ECS debit solved Credibility issues in ECS debit solved by internet. The customer first by internet. The customer first validates the bill through Internet validates the bill through Internet and thereafter the User releases the and thereafter the User releases the ECS DebitECS Debit

2222

What Corporates ShouldWhat Corporates Should Do…????Do…????

• Analyse the payments and receipt streamAnalyse the payments and receipt stream• Identify the payments for each type of Identify the payments for each type of

product. (RTGS, SEFT, ECS and EFT)product. (RTGS, SEFT, ECS and EFT)• Put a mechanism in place for receipts and Put a mechanism in place for receipts and

payments.payments.

•Demand the Required Products Demand the Required Products from your Bank !!!from your Bank !!!

2323

Thank You..Thank You..