1. Adoption of ISO 20022 Standards for RTGS in India Reserve Bank of India

2. Scope of Presentation Adoption of ISO 20022 in India Strategy Approach Implementation Future Possibilities

3. Adoption of ISO 20022 in India : Strategy Dr A S Ramasastri CGM in Charge, DIT, RBI

4. ISO 20022 Adoption Strategy : Preliminary Work Existing RTGS is India uses proprietary message formats. Working Group on Approach Paper for NG-RTGS recommended adoption of ISO 20022 message standards. RBI set up a Working Group on Adoption of ISO 20022 message standards with members from Banks, IDRBT, CCIL, NPCI, IBA and RBI Members of the Working Group recommended that there is a need for adoption of ISO 20022 message standard in India The Working Group also found that it was feasible to implement the standards for the enhanced RTGS planned by RBI

5. ISO 20022 Adoption Strategy : Eco system preparedness RBI took a decision to implement ISO 20022 message formats along with several other enhancements to RTGS as not doing now would postpone implementation by a few years ISO 20022 compliant Message formats were sent for certification by the ISO 20022 Standards group Montran was advised to make RTGS product ISO 20022 ready IDRBT, the provider of Structured Financial Messaging Formats (SFMS), was entrusted with the responsibility of Designing the mapping document between existing proprietary message formats and ISO 20022 compliant message format Preparation of XSDs Developing a convertor for temporary use of banks until they migrate their systems to ISO 20022 compliant

6. Adoption of ISO 20022 in India : Approach Dr A K Hirve CGM, DIT, RBI

7. ISO 20022 Adoption Approach RBI formed the Working Group for Adoption of ISO 20022 Messaging Standards with following Terms of Reference Designing ISO 20022 compliant message formats for Next Generation Real Time Gross Settlement (NG-RTGS) and National Electronic Fund Transfer (NEFT) Payment Systems to suggest adoption of uniform referencing system for payment transactions and explore possibility of adopting uniform International Bank Account Number (IBAN) by banks in India. Membership SBI, HDFC Bank, HSBC Bank, ICICI Bank and ING Vysya Bank, CCIL, NPCI, IDRBT, DPSS, DGBA and DIT

8. ISO 20022 Adoption Approach… Main issues and concerns ISO based messages are four to six times longer, require twice the bandwidth and about twice the disk space for storage. To address these concerns benchmark testing of ISO compliant messages was carried out with the involvement of member banks and SWIFT During benchmarking, it was observed that these messages are, in fact, processed more efficiently, and have versatile content structure for better MIS and regulatory reporting. Benefits of Adoption of ISO 20022 standards provide opportunities in other business areas such as Corporate Treasury Management, Trade Finance marginal cost for implementation, technical feasibility and other advantages, working group suggested proactive adoption of ISO standards Member banks suggested to implement it early as it will help in back to back automation upto the customer end.

9. ISO 20022 Adoption Approach… The WG designed identical message formats for RTGS and NEFT for customer payments Kept provision to introduce IBAN in future provision of additional fields for ordering and beneficiary customer to take care of future government MIS requirements provision for NRE or such remittances as per RBI requirements mandatory field for ‘Purpose code’ to improve MIS, better communication to the customer and regulatory reporting provision for multi currency payment and settlement. Other message formats include messages for interbank payments, debit /credit notification, and net clearing requests. As regards ‘own account transfers’, ISO message format already available in the ISO20022 library of messages was adopted.

10. Adoption of ISO 20022 in India: Implementation Dr Anil Kumar Sharma General Manager, DIT

11. ISO 20022 Implementation : Need ISO 20022 is required to improve and automate Corporate-to-Bank Communication, Bank-to-corporate bank account cash reporting More processes needs to be automated so new message types needs to be created. It is only natural to create new message types in XML format - hence the new ISO 20022 format.

12. ISO 20022 Implementation : Benefit From a system point of view, XML messages are actually easier to work with than any other format. For most contemporary systems XML is the default format when exporting data. Hence for new system implementations it is only natural to use this format. So we do have a business case. XML costs less to implement when we implement new systems.

13. ISO 20022 Implementation : Pros ISO 20022 standards are XML based – Easy to maintain and uses Java Technology MX messages typically carry more rich and explicit information than their MT counterparts, may help in Anti-Money Laundering May reduce costs to banks and increase in their competitive advantage in long-run

14. ISO 20022 Implementation : Cons Increase in Memory and CPU utilisation between MX and MT is nominal and negligible. Again this is highly dependent on the type of implementation, platform, language, COTS product (XML parser), etc. Although there is increase in disk space and network bandwidth requirement, so far this has not been a blocking factor for market infrastructures for countries who have decided to migrate their application to ISO 20022.

15. Big Bang Migration : Pros & Cons Pros: Uniform and timely migration, lower complexity, lower cost, uniform functionality Cons: Potential operational & Systemic risks Requirements: – Thorough Industry testing – Cut off deadline well defined to stakeholders – Old system remains for fall-back and is also well tested

16. Phased Migrations : Pros & Cons There are two options: – Option 1: Dual RTGS Systems to one CBS Pros: Migration in line with institutional investment cycles Cons: More complex and more expensive for central banks, more risks, inertia and potential for delay Requirements: – Design and development of dual RTGS systems – Agreed timelines of migration and follow-up and incentives

17. Phased Migrations : Pros & Cons There are two options: – Option 2: Single RTGS System with “transition services” (at RTGS application or messaging layers) Pros: Migration in line with institutional investment cycles Cons: Less complex and less expensive for central banks as compared with option 1, inertia and potential for delay Requirements: – Capable providers and robust transition services, e.g. legacy standards translation – Agreed timelines of migration and follow-up and incentives

18. ISO 20022 Implementation : Process Decided to adopt Migration in Phased manner with transition services at the messaging layer Banks given three months time for infrastructure readiness Three modes of access with two modes requiring ISO compliance from day 1 and third mode provided converter. Messaging Hub was made compatible with ISO 20022 standards RTGS OEM product made its product ISO 20022 compliant Pilot Testing with Banks carried out over a period of five months to familiarise them with ISO 20022 compliant message formats

19. ISO 20022 Message Formats Implemented Message IdentifierMessage NameUse of messageUsed versionAdditional Information pacs.002.001FIToFIPaymentStatusReportYesV04 Multi-net settlement batch (MNSB) response and Own account transfer pacs.004.001PaymentReturnYesV03Undo previously settled payment pacs.008.001FIToFICustomerCreditTransferYesV03Customer credit transfer pacs.009.001FinancialInstitutionCreditTransferYesV03 Interbank transfer, MNSB request and Own account transfer camt.053.001 BankToCustomerStatementYesV03End-of-day NG-RTGS statements camt.054.001 BankToCustomerDebitCreditNotificationYesV03Customer Credit / Debit Notification

20. ISO 20022 Message Formats Implemented Message IdentifierMessage NameUse of messageUsed versionAdditional Information Admi.004SystemEvent NotificationYesV01 Ack/Nack messages exchanged between ISO 20022 compliant systems upon delivery of messages Camt.998Broadcast MessageYesV02 Not an ISO 20022 messages. It is SWIFT proprietary MX message which is free to use under certain terms and conditions Head.001Business Application HeaderYesV01 Each financial message i.e. Pacs.008, Pacs.009, Pacs.004, Pacs.002, Camt.054 will have Header which contains sender and receiver information alongwith Digital Signature of sender of the financial message. Pacs.009IDL RequestYesV03 Fund request from RTGS to Central Bank Security Settlement System (SSS) Pacs.009IDL ResponseYesV03 IDL response from Security Settlement System (SSS) to RTGS Pacs.004IDL ReversalYesV03IDL reversal from RTGS to SSS

21. ISO 20022 Implementation Approach – Documents Released on RBI Website Documents Released on RBI website through Press Release dated March 7, 2013 Documents Released on RBI website through Press Release dated March 7, 2013 http://www.rbi.org.in/scripts/BS_PressRelease Display.aspx?prid=28270 http://www.rbi.org.in/scripts/BS_PressRelease Display.aspx?prid=28270

22. Adoption of ISO 20022 in India: Future Possibilities Dr A S Ramasastri CGM in Charge DIT, RBI

23. Future of ISO 20022 in India : Possible Areas of Implementation NEFT ACH CBS of RBI CBS of all Banks

24. Thank You