RBI to ensure consumer safety in high-risk retail payment systems

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Mumbai: Reserve Bank of India governor, D Subbaro has said that as retail payments go into large-scale expansion, new issues will emerge including the demarcating line between the large-value and the retail-payment systems, which is getting blurred.

“This calls for increased efforts to set up benchmarks even for retail payment systems. Considering the risks inherent in such systems, fresh initiatives are needed to address customer-protection issues. These assume greater importance in the context of the increasing spread of the concept of branchless banking,’’ he said while delivering valedictory address on Thursday at the regional seminar on payment and settlement systems, organised jointly by the RBI and the Bank for International Settlements, Switzerland at Mamallapuram, Chennai, on “Retail Payments : Perspectives and Way Forward’’.

By all indications, retail payments are going to be the drivers of the future payment and settlement architecture. The RBI will take proactive steps towards their operationalisation but within a regulatory framework that will mitigate the risks, he explained.

RBI has a cryptology for risk management – RISK, which would take into account the following:

R – Recognition – to identify any risk early on and take proactive steps before it gets out of hand;

I – Improvisation – of new methods, techniques and tools to secure better monitoring, and providing for a feed-forward rather than a feed-back system;

S – Segmentation – to address smaller systems and sub-systems individually so as to address their unique features while also being mindful of the systemic impact; and

K – Knowledge – to enable knowledge-based decisions in a knowledge-powered economy, resulting in scientifically-engineered and output-oriented action.

Today, India boasts of some of the world’s lowest per call rate – most local calls are charged only to the caller, and the per call rate is just Re.0.50 paise per minute (just about one US cent).

An encore of similar dramatic reduction in costs in the retail payment systems is not beyond the realm of possibility. A beginning has already been made in the area of ATM-based payments whereby no charges will be levied on customers for use of ATMs not belonging to their own bank, from April, 2009, he said .