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National clearing house likely by April

Business Standard
Banking Bureau , January 18, 2006

The Reserve Bank of India (RBI) would be setting up the National Payment Corporation of India (NPCI) - aimed at taking over all clearing house operations performed in the country - by April 2006.

The RBI is currently in the process of registering the company, said R B Barman, executive director, at Banknet India’s seminar on payment systems.

NPCI is being registered under Section 25 of the Companies Act, which implies that equity holders will not share profits earned by the company. The authorised capital of the company will be Rs 300 crore and the initial paid-up capital would be Rs 100 crore.

About 20 banks would join initially as equity holders and no single bank would hold more than 10 per cent. The banks include prominent players such as State Bank of India, ICICI Bank, Citibank, Union Bank of India, Bank of Baroda and HSBC.

The clearing house functions are at present carried out by RBI, SBI and a few other banks. These operations will be transferred to the new company once it comes into being. Once the new company starts functioning, RBI will focus only on regulatory issues.

The setting up of the NPCI is part of RBI efforts to build the appropriate technological infrastructure for the smooth functioning of the financial system. At the core of this drive is the development of a sound and efficient payment and settlement system.

The overall turnover of various payment and settlement systems in 2004-05 was up by 27.4 per cent to Rs 2,20,04,393 crore. The retail payments systems include the cheque clearing system and the electronic systems, including electronic clearing service, electronic funds transfer and card-based systems.

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