The Reserve Bank of India (RBI) has charted a plan to give a major push to the electronics payment system by making it reach a level of 50% by volume and 95% by value of the aggregate payment system transactions by March 2009.
Addressing a conclave on Indian Banking ? Vision 2010 ? on Friday, V Leeladhar, deputy governor, Reserve Bank of India, said the volume of paper-based clearing in the country is the sixth largest in the world and, during April 2007 to March 2008, about 1.46 billion cheques were cleared in the country. At present, about 18 million transactions flow through the ECS system every month. This facility is currently available at 70 centres in the country. Settlement takes place on T+1 basis and the cycle gets completed on T+1. The RBI is also in the process of developing a national ECS system.
?There are also some nagging efficiency issues in the payment system. While the current clearing cycle of T+1 basis for the cheques payable locally compares favourably with the best in the world, it is necessary to look into the entire cheque collection cycle ? from the time a customer deposits a cheque at a branch till the point of realisation of credit in his account. There is perhaps scope for continuous improvement in overall collection cycle. Going by the number of complaints received, it appears that customer service in this area is not very customer-centric,? he said.
According to him, once the chque truncation system becomes fully operational, the system would be the largest in the world and would leapfrog the country from the paper-based instruments to a country with a fully electronic mode of payment and settlement.
Necessary amendments have been made to the Negotiable Instruments Act, 1881, which provides legal recognition to the electronic image of the truncated cheque. These amendments provide a legal basis for the cheque truncation system, he explained.
On National Payments Corporation of India (NPCI), Leeladhar said the entity, registered under the Companies Act, will be owned by banks and financial institutions. NPCI will be a Section 25 company, which will not distribute its profits as dividend, but will plough it back for the improvement and expanding the reach of the retail payment systems. The ownership of the company will be suitably diverse with no bank or groups of banks having shareholding exceeding 10% of the total shareholding.
The Payment and Settlement Systems Act 2007 has laid down that not less than 51% of the equity of this company will be held by public sector banks. The work relating to the setting up of NPCI is in progress.
Meanwhile on the sidelines of the conference Leeladhar said rising credit card defaults in the country are a matter of concern.
?Defaults are going up. It?s a matter of concern,? he told reporters on the sidelines of a banking conference when asked about the practice of some banks, who issue cards unsolicited without checking the creditworthiness of their customers.