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

2. February 9, 2011DPSS, RBI2 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

3. February 9, 2011DPSS, RBI3 Overview of Payment & Settlement Systems

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” February 9, 20114DPSS, 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 February 9, 20115DPSS, RBI

6. Mission “To ensure that all the payment and settlement systems operating in the country are Safe, Secure, Sound, Efficient, Accessible and Authorised ". February 9, 20116DPSS, RBI

7. Payment Systems – Major Milestones 1986 1992 2005 1994 1999 2000 2002 2004 2007 2008 2009 2010 MICR EFT / IDRBT IT ACT RTGS PSS ACT RECS / Pre-paid / CPSS Member ECS INFINET CCIL DPSS / NEFT / NFS CTS / NECS / Mobile / NPCI / Act Notification HV Close / Directives on Settlement, Defaults and Disputes February 9, 20117DPSS, RBI

8. Payment Systems February 9, 20118DPSS, RBI

9. February 9, 2011DPSS, RBI9 Payment Systems – By volume

10. February 9, 2011DPSS, RBI10 Payment System – By value

11. February 9, 2011DPSS, RBI11 Introduction to Electronic Payment Systems

12. February 9, 2011DPSS, RBI12 Electronic Payment Systems (EPS) Simpler Safer Faster Cost Effective Enhanced Reach Eco-friendly

13. February 9, 2011DPSS, RBI13 Why EPS Cash / PaperElectronic Physical Movement of cash / paper instruments Electronic Message movement Fraud prone as paper moves outside the banking system Message moves inside the banking system hence less prone to frauds Geographical restrictions No such restrictions. Payment anywhere in India possible Time required to move paper makes the system slow Electronic movement of messages makes the system real time Operational cost of running the system very high Operational cost is very low As volume increases, logistics to be increased No such requirement

14. February 9, 2011DPSS, RBI14 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

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 February 9, 2011DPSS, RBI15

16. February 9, 2011DPSS, RBI16 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 – c onfined to cover local Clearing House only

17. February 9, 2011DPSS, RBI17 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

18. February 9, 2011DPSS, RBI18 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

19. February 9, 2011DPSS, RBI19 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

20. February 9, 2011DPSS, RBI20 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

21. February 9, 2011DPSS, RBI21

22. February 9, 2011DPSS, RBI22 NEFT – By amount

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 February 9, 2011DPSS, RBI23

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 February 9, 201124DPSS, RBI

25.  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 Points of Points of Sale Alternate Payment Channels… February 9, 201125DPSS, RBI

26. Alternate Payment Channels  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 Mobile Banking February 9, 201126DPSS, 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 February 9, 201127DPSS, RBI

28. February 9, 2011DPSS, RBI28 Electronic retail payment systems – By value

29. February 9, 2011DPSS, RBI29 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

30. 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 February 9, 2011DPSS, RBI30 RBI Initiatives

31. February 9, 2011DPSS, RBI31 Present status in the country and the North Eastern states

32. February 9, 2011DPSS, RBI32 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

33. February 9, 2011DPSS, RBI33 Branch coverage NEFTNECSRTGSATMs All India74687505957387667591 NE (6 States)525308609387 Assam111457910931007

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 February 9, 2011DPSS, RBI34

35. February 9, 2011DPSS, RBI35 Roadmap for implementation in North Eastern states for Government transactions

36. Possible Channels RECS NEFT Mobile Banking Prepaid Payment Instruments February 9, 2011DPSS, RBI36

37. February 9, 2011DPSS, RBI37 RECS – Process Flow SBI Imphal SBI Agartala UBI Itanagar UBI Dispur BOB RECSSC SBI RECS Service Centre DAD Guwahati IDBI RECSSCCITI RECSSC UBI RECS Service Centre UBI RECSSCYES RECSSC Sponsor Banks Destination Banks Secure Web Server (SWS) Processing NCC, GUW SWS

38. February 9, 2011DPSS, RBI38 Participation Essentials Account with RBI / Commercial Banks Details of beneficiaries Process re-engineering Checks and balances Training

39. Discussion Points February 9, 2011DPSS, RBI39