Bank Card & ePayment

2005
E-Payment Products
based on Centralised RBI
Platforms
By :
Kaza Sudhakar
General Manager
Department of Payment and Settlement
Systems
Reserve Bank of India
 Banking Infrastructure of
India
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

2
 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

3
 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

4
 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
 

5
 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.

6
 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

7
 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

8
 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.

9
 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.

10
 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

11
 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.

12
 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.

13
 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.

14
 How ECS Works - Process flow

Data on Day- Reports on Day-1

1
Sponsor Bank Clearing
House Destination banks’
Data on Day-1

service branches
Encrypted

Reports on Day-1

Destination
branches

Credit on Day-2
User Institution
Beneficiaries’
A/Cs 11 15
 ECS - Processing of Uncredited Payment
Instructions contd...

Encrypted Output Data on Return Data submitted on

Post Settlement Post Settlement
Day-1 Day-1
Clearing
Sponsor Bank House
Destination banks’
service branches
Encrypted Output

Post Settlement
Data on

Return Advice on Post Settlement Day-1

Day-2

Destination
branches
User Institution
16
 Centralised ECS…
• Available at 15 centres..
• Submit data file at one location and
get credit across 15 locations..
• Funds transfer on T+2 basis..

17
 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

18
 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.,

19
 Banking Products for ECS
Debit
• Credit Card payments
• Utilities payments .. Telephone, Cell
phones, Electricity bills
• Equated Monthly Instalment payments of
personal loans
• School fees

20
 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

21
 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 !!!

22
Thank You..

23