BANKING GK : PAYMENT SYSTEM IN INDIA (PART 2)

METHODS OF MAKING PAYMENTS

How can an NRI remit money into India?

As an NRI, an individual can remit funds into India through normal banking channels using the facilities provided by the overseas bank. Alternately, an NRI can also remit funds through authorised, Money Transfer Agents (MTA). Of late, a good number of banks have launched their inward remittance products which facilitate funds transfer in matter of hours.

How do banks make payments for their own transactions?

Ordinarily, the transactions among banks (not pertaining to customer transactions) would be for large values .Hence such transactions are called as large-value funds transfers. The actual transfer of funds will take place through the accounts which the banks maintain with the RBI. For this purpose, banks can give cheques drawn on their account maintained with RBI to one another, which will then be processed through the clearing house. Alternatively, they can also make use of large value payment system called as Real Time Gross Settlement System where funds transfer takes place instantaneously, based on electronic instructions just like NEFT/EFT in the case of individuals and companies.

What is Real Time Gross Settlement System?

Real Time Gross Settlement (RTGS) system, introduced in India since March 2004, is a system through which electronic instructions can be given by banks to transfer funds from their account to the account of another bank. The RTGS system is maintained and operated by the RBI and provides a means of efficient and faster funds transfer among banks facilitating their financial operations. As the name suggests, funds transfer between banks takes place on a ‘real time’ basis. Therefore, money can reach the beneficiary instantaneously and the beneficiary’s bank has the responsibility to credit the beneficiary’s account within two hours.

Can individuals make payments through RTGS system?

Yes, individuals can transfer funds through RTGS system through their banks. Though the system is primarily designed for large value payments, bank customers have the choice of availing of the RTGS facility for their time critical low value payments as well. A customer who desires to use this facility should approach his bank to find out whether his own bank branch as well as the beneficiary’s bank branch is enabled to transfer funds through RTGS system. Banks may levy charges for such funds transfers at their discretion and based on the customer-bank relationship. However, RBI has decided that small value customer transaction of up to Rs. 1 lakh would be migrated to NEFT/EFT.

What is Cheque Truncation?

Cheque Truncation is a system of cheque clearing and settlement between banks based on electronic data/images or both without physical exchange of instrument.

How would Cheque Truncation benefit the bank customers?

The bank customers would get their cheques realised faster as same day (for local cheques) or next day (for outstation cheques) clearing is possible in Cheque Truncation System (CTS). As straight through processing and automated payment processing are enabled by CTS faster realisation is accompanied by a reduction in costs for the customers and the banks. It is also possible for banks to offer innovative products and services based on CTS. The banks have additional advantage of reduced reconciliation and clearing frauds.

What is the role of RBI in payment systems?

The RBI, apart from the role of regulator and supervisor of payment systems, plays the role of a Settlement Bank apart from being a catalyst, an operator and a user. The RBI has been taking initiatives in introducing new modes of more efficient and safe means of effecting payments in the country on a continuous basis. The RBI introduced the system of Magnetic Ink Character Recognition (MICR) based cheque clearing during late 80's for four metropolitan cities (Mumbai, New Delhi, Chennai and Kolkata). During mid 90s, electronic payment systems like ECS and NEFT/EFT were introduced. During 2004-05, RTGS was introduced. Besides introducing these newer mechanisms or systems, the RBI has also been constantly ensuring that the existing systems are upgraded / refined to increase their efficiency and to meet the requirements of customers. Taking advantage of advancements in technology, the RBI has brought in additional safety measures in these systems to make them secure and also to maintain the integrity of such transactions.

Besides operating the various components of payments systems, RBI also participates in these systems as a user. RBI also acts as a service provider. RBI has the role of regulating and supervising the various payment systems.

How does RBI regulate payment systems?

The Board for regulation and supervision of Payment and Settlement Systems (BPSS) is a sub-committee of the Central Board of the RBI and is the highest policy making body on payment system. The Board as well as the council are assisted by a recently created department the Department of Payment and settlement Systems (DPSS). The Board has been entrusted with the responsibility to authorise, prescribe policies and set standards for all existing and future payment systems in the country. The Board also has the powers to determine membership criteria to these systems and related policies.

Whom should I approach in case of any complaints relating to customer services under payment systems?

The customer may approach the bank concerned to redress the complaint. In case of lack of response / satisfactory redressal by the bank, the customer may approach the Grievance Redressal Cell in the local RBI office. The customer may also approach the office of the Banking Ombudsman for redressal of his complaint.