Second Quarter Review of Monetary Policy 2010-11
-Announced on the 2nd November 2010
Developmental and Regulatory Policies
VI. Institutional Developments
Payment and Settlement Systems
Membership to the Committee on Payment and Settlement Systems
124. India became a member of the Committee on Payment and Settlement Systems (CPSS) constituted under the aegis of the Bank for International Settlements (BIS). The Reserve Bank is represented on four Working Groups of CPSS, viz., (i) General Review of Standards; (ii) Repo Market Infrastructure; (iii) Post Trade Services; and (iv) Retail Payment Systems.
Standardisation of Security Features on Cheque Forms
125. As indicated in the Monetary Policy Statement of April 2010, a cheque truncation system (CTS)-2010 standard with benchmark specifications for security features on cheques and field placements on cheque forms has been prescribed. The CTS-2010 standard, inter alia, included a prescription prohibiting alterations/corrections on cheque forms. It has since been clarified that the prescription is applicable only to cheques cleared under the image-based cheque truncation system and will be effective December 1, 2010. The prescription will not be applicable to cheques cleared under magnetic ink character recognition (MICR) clearing, non-MICR clearing, OTC collection (for cash payment) or direct collection of cheques outside the clearing house arrangement.
126. The IBA and National Payments Corporation of India (NPCI) have been jointly vested with the responsibility for implementation of the new cheque standards.
Operationalisation of National Payments Corporation of India
127. As indicated in the Monetary Policy Statement of April 2010, the NPCI has the envisioned role to look at future innovations in the retail payment space in the country. The NPCI has implemented a pilot project for settlement of inter-bank mobile payments. Further, the roll-out of the grid-based cheque truncation system (CTS) project at Chennai is likely to be operationalised by the end of March 2011.
Performance of National Electronic Funds Transfer System
128. As at end-July 2010, around 70,000 branches of 98 banks had participated in the national electronic funds transfer (NEFT) system and the volume of transactions processed increased to 9.5 million in July 2010.
Automated Data Flow from Banks
129. As indicated in the Monetary Policy Statement of April 2010, a Core Group consisting of experts from banks, the Reserve Bank, the Institute for Development and Research in Banking Technology (IDRBT) and the IBA has been constituted for preparing an approach paper on automated data flow (a straight through process) from the core banking solution (CBS) or other IT systems of commercial banks to the Reserve Bank. The Core Group has prepared an approach paper, which deals with automated data flow from banks to the Reserve Bank. The paper, inter alia, discusses the methodology to be adopted by banks to classify themselves into a cluster based on its technology and process dimensions. Based on this, estimated timelines for achieving complete automation of submission of returns have also been furnished. The approach paper is being examined and it is expected to be circulated to the banks for necessary action at their end.
130. The approach suggested for banks will be implemented in two phases. In the first phase, banks would be required to ensure seamless flow of data from their transaction server to their management information system (MIS) server and generate all returns from the MIS server automatically, without any manual intervention. In the second phase, the Reserve Bank would introduce a pull mechanism for the flow of data from the MIS server of banks in a straight through process. The timeline of the entire project will be determined in consultation with banks.
Real Time Gross Settlement System
131. The Indian RTGS has displayed tremendous growth in both transactions volume and the values that it has been processing since its inception in March 2004. With the increased number of electronic payment transactions, it has become expedient to position the Indian RTGS system primarily for processing and settling large value payment orders. Further, the Reserve Bank has set up a robust retail electronic funds transfer system in the form of NEFT, with near real-time settlement finality with 11 settlement cycles in a day. Accordingly, it has been decided, in consultation with system participants:
to increase the threshold limit for RTGS transactions from the present limit of `1 lakh to `2 lakh.
132. As a further incentive to customers to move their transactions to NEFT, a new value band in the `1 lakh to `2 lakh will be created, with customers having to pay lower charges vis-à-vis RTGS transactions.
133. The detailed guidelines in this regard will be issued separately.
134. As indicated in the Monetary Policy Statement of April 2010, a Working Group comprising representatives from the Reserve Bank and select commercial banks, viz., SBI, PNB, ICICI Bank and HDFC Bank was constituted for preparing an approach for implementation of next generation RTGS. The Group submitted its report in August 2010, which has since been accepted. The implementation of the next generation RTGS system is in progress, which may take about two years for completion.
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