RBI plans new Payment Systems

One of the Indian Sectors which is truly consumer oriented and technically advanced is Banking. Reserve Bank Of India (RBI) is behind the scenes in getting Indian Banking domain to the world class and highly competitive with very many new systems and continues to play an important role in introducing customer service initiatives. The recent steps taken in various payment system segments include – verified card payments (increasing card security), ATM payments (increasing accessibility to the public, bringing transparency and reasonableness in charges), rationalising charges for electronic payments (NEFT / RTGS) and collection of outstation cheques, mobile payments, pre-paid payment instruments, etc.

RBI plans new Payment Systems - New RTGS, India MoneyLine, Mobile Payment Infra, India Card - rival to Visa and MasterCard

Now, RBI in its report “Payment Systems in India: Vision 2009-12″ has unveiled its new projects. Here are the details:

1. Implementing a new and feature rich RTGS system : For scaling the existing the RTS facility with latest technologies for more flexibility in operations and better liquidity saving features.

2. India MoneyLine – A 24×7 system for one-to-one funds transfers – The existing NEFT system operates during weekdays from 9 am to 5 pm and on Saturdays from 9 am to 12 noon. With “India MoneyLine”, RBI is considering to extend NEFT to function on a 24×7 basis or to develop a new system akin to the Faster Payments Service in the UK which operates on a 24×7 basis.

3. India Card – A domestic card initiative – RBI is actively looking at introducing a domestic payment card (India Card) and a PoS switch network for issuance and acceptance of payment cards. The need for such a system arises from two major considerations

(a) the high cost borne by the Indian banks for affiliation with international card associations in the absence of a domestic price setter

(b) the connection with international card associations resulting in the need for routing even domestic transactions, which account for more than 90% of the total, through a switch located outside the country — the value of credit card transactions were Rs.65,356/- crores in 2008-09, a 100 per cent jump in the last three years. This means almost Rs 60,000 crore was settled outside India through Visa and Mastercard which act as the payment link on behalf of the bank, merchant and card holder. Debit card transactions amounted to Rs 18,547 crore in 2008-09.

So, this new initiative by RBI makes high sense and its very timely. The Indian Banks Association is also in favour of setting up a payment card. If everything has to go as planned, then we might see this new RBI card as a major rivalry to the existing Visa and MasterCards.