RESERVE BANK OF INDIA (PART - 9)

REGULATOR AND SUPERVISOR OF PAYMENT AND SETTLEMENT SYSTEMS

Payment and settlement systems play an important role in improving overall economic efficiency. They consist of all the diverse arrangements that we use to systematically transfer money currency, paper instruments such as cheques, and various electronic channels.

The Payment and Settlement Systems Act of 2007 (PSS Act) gives the Reserve Bank oversight authority, including regulation and supervision, for the payment and settlement systems in the country. In this role, RBI focus on the development and functioning of safe, secure and efficient payment and settlement mechanisms.

The Reserve Bank has a two-tiered structure. The first tier provides the basic framework for our payment systems. The second tier focuses on supervision of this framework. As part of the basic framework, the Reserve Bank’s network of secure systems handles various types of payment and settlement activities. Most operate on the security platform of the INdian FInancial NETwork (INFINET), using digital signatures for further security of transactions. Here is an overview of the various systems used:

Retail payment systems: Facilitating cheque clearing, electronic funds transfer, through National Electronic Funds Transfer (NEFT), settlement of card payments and bulk payments, such as electronic clearing services. Operated through local clearing houses throughout the country.

Large value systems: Facilitating settlement of inter-bank transactions from financial markets. These include:

♯   Real Time Gross Settlement System (RTGS): for funds transfers

♯   Securities Settlement System: for the government securities market

♯   Foreign Exchange Clearing: for transactions involving foreign currency

Department of Payment and Settlement Systems: The Reserve Bank’s payment and settlement systems regulatory arm.

Department of Information Technology: Tech support for the payment systems and for the Reserve Bank’s internal IT systems.