Some of the interesting points:

5.3 The Bank shall publish the Red Book on Payment Systems for India in collaboration with CPSS-BIS.

Red Book is a reference publication by the Committe on Payment and Settlement Systems under BIS on a country’s payment systems. It’s hightime we had this document published even though RBI’s payments section gives a comprehensive overview of the same along with statistics.

6.5.2 All bank branches will be enabled with IFSC and MICR codes. The intention is to leave the user with the choice of product for retail and small-value transactions viz. use MICR for NECS and IFSC for NEFT.

With close to 50K of the 64K (as of Mar ’09) branches already NEFT enabled, this should be one relatively quick target to accomplish. And probably making all new branch licenses contingent on participating in NEFT/NECS should help!

6.5.6 Efforts would be made to provide positive acknowledgement to the remitter confirming credit to the beneficiary’s account for transactions initiated in NEFT will be introduced. This would give comfort to the remitter and enhance his usage.

Oh yeah, definitely! Senders naturally face anxiety in a Implied-positive-unless-negated scenario, and a positive confirmation should go a long way in increasing customer confidence in the system and consequently increase its adoption. Though a ping-back is easy to implement in a completely automated processing system, banks still using manual processing of NEFT messages for posting credits will face the increased burden of generating confirmation messages. Well, one more way to push banks for automated integration with the payment systems!

6.5.13 Further to the initiatives taken to operationalise Indo-Nepal Remittance Facility Scheme (for one-way migrant remittances from India to Nepal), operationalisation of electronic products like NEFT and ECS / NECS in Bhutan will be taken up….

Having a seamless cross-border payment systems would be a primary requirement for establishment of any single-currency system or a EMU-like structure for SAARC countries.

6.6.6 Cheque Truncation System (CTS) will be rolled out at Chennai. National roll-out of CTS will be considered once this project is operationalised.

The ‘…will be considered once…’ doesn’t really inspire confidence! Instead of setting a clear deadline, RBI still seems to be waiting for some more experience/data before deciding on the national implementation of the much talked about CTS.

Now to the really stand-out bits of the document:

India MoneyLine – A 24×7 system for one-to-one funds transfers – ….The Bank would pursue the suggestion to consider the need 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

Apart from person-to-person payments, this would definitely be a great boost to the e/mobile-commerce with the merchant establishments now having to tie-up with payment gateways individually for credit card payments or net banking transfers for round the clock service. Having a 24×7 NEFT system should provide the next jump in electronic payment volumes.

India Card – A domestic card initiative –The concept of a domestic payment card (India Card) and a PoS switch network for issuance and acceptance of payment cards would be looked into. 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.

This will be one awesome achievement! Though in conception stage since 2007, India Card can save a lot for the Indian Banks in the mandatory cut of the Intercharge fees typically paid to the card networks of Visa, MasterCard etc. China’s UnionPay is a similar system in operation since 2002 which seeks to achieve the same purpose.

Mobile payments settlement network – Mobile phones are expected to emerge as an important channel for transmission of payment instructions. Efficient mobile payments would require real time transfer of funds with adequate security. Currently all inter-bank mobile transfers are payment instructions for settling funds through existing payment systems. This would require building a national infrastructure for facilitating real time mobile payments.

The need for the mobile payments settlement network has been highlighted by RBI in its operative guidelines for Mobile Banking transactions in India, issued in Oct 2008. Though the guidelines themselves have been a bit of a dampener, RBI should hopefully open them up in the future to make setting up this settlement network worthwhile!

I make no claims to be an expert on the subject and (especially hence) I encourage visitors to comment back with their views/counterviews. Hope I get to keep this blog going at a fairly decent pace!