Centralised and Decentralised Payment Systems Part 1 Elearning

Centralised and Decentralised Payment Systems, Part 1 E-learning series College of Agricultural Banking Disclaimer: "The presentation is for academic and information purposes only. Please be guided by the relevant laws, circulars, instructions etc. in this regard. Usual disclaimer shall apply. "

Payment Systems “Payment system” means a system that enables payment to be effected between a payer and a beneficiary, involving clearing, payment or settlement service or all of them, but does not include a stock exchange; ◦ ◦ Explanation. - For the purposes of this clause, “Payment system” includes the systems enabling credit card operations, debit card operations, smart card operations, money transfer operations or similar operations” - Section 2 (i) of Payment and Settlement Systems Act 2007 16 -12 -2021 2

Settlement “Settlement” means settlement of payment instructions and includes the settlement of securities, foreign exchange or derivatives or other transactions which involve payment obligations; - Sction 2 (n) of the PSS Act 2007 16 -12 -2021 3

Centralized Payment Systems ◦ Real Time Gross Settlement (RTGS) ◦ National Electronic Fund Transfer (NEFT) Decentralized Payment Systems • Cheque Truncation System (CTS) • Express Cheque Clearing System (ECCS) 16 -12 -2021 4

Difference between RTGS and NEFT 1. Settlement methodology - Real Time Gross Settlement (RTGS) Vs Deferred Net Settlement (DNS) 2. Limit on value 3. Timings – RTGS NEFT 24 x 7… 4. Positive confirmation 5. Service Charges 16 -12 -2021 Sr. No. Event Time 1. Open for Business 07: 00 hours 2. Customer transactions (Initial Cut-off) 18: 00 hours 3. Inter-bank transactions (Final Cut-off) 19: 45 hours 4. IDL Reversal 19: 45 hours - 20: 00 hours 5. End of Day 20: 00 hours 5

Access Criteria for CPS and DPS ◦ Membership is open to all scheduled / licensed banks. ◦ Unlicensed banks can continue to participate in the decentralised payment systems as sub-members. ◦ Co-operative societies cannot be either direct members or submembers in any payment system. ◦ Notified institutions like Post Office Savings Bank will be eligible for membership in decentralised payment systems. ◦ Primary Dealers will also be eligible for RTGS membership subject to the extant regulations and recommendations of the regulatory department concerned. 16 -12 -2021 ◦ For clearing organisations / Payment Service Provisers (PSPs) and other entities, the RBI would consider membership requests on a caseto-case basis. 6

Centralised Payment Systems – Specific requirement for membership i. Minimum CRAR of 9% (as per the latest audited balance sheet); ii. Net NPAs below 5% (as per the latest audited balance sheet); iii. 16 -12 -2021 Minimum net-worth of Rs 25 crore; iv. Availability of Core Banking Solution / centralised processing system at applicant's end; and v. Recommendation of the concerned regulatory / supervisory 7

End of Part 1 16 -12 -2021 8