Payment and settlement systems in India

Payment and settlement systems in India are regulated by the Payment and Settlement Systems Act, 2007 (PSS Act), legislated in December 2007.

The Reserve Bank of India continually strives towards ensuring the smooth progress of the payments system. In India it is the BPSS (Board for Regulation and Supervision of Payment and Settlement Systems) which is in charge of regulating these systems.

India has multiple payments and settlement systems. RBI Still continues to evolve new payment methods and slowly revamping the payments and settlement capability in India.

India supports a variety of electronic payments and settlement system, both Gross as well as Net settlement systems.

The Gross systems is

The Net settlement systems are;

The Reserve Bank of India is doing its best to encourage alternative methods of payments which will bring security and efficiency to the payments system and make the whole process easier for banks. The Indian banking sector has been growing successfully, innovating and trying to adopt and implement electronic payments to enhance the banking system. Though the Indian payment systems have always been dominated by paper-based transactions, e-payments are not far behind. Ever since the introduction of e-payments in India, the banking sector has witnessed growth like never before.

According to a survey by celent, the ratio of e-payments to paper based transactions has considerably increased between 2004 and 2008. This has happened as a result of advances in technology and increasing consumer awareness of the ease and efficiency of internet and mobile transactions.

In the case of India, the RBI has played a pivotal role in facilitating e-payments by making it compulsory for banks to route high value transactions through Real Time Gross Settlement (RTGS) and also by introducing NEFT (National Electronic Funds Transfer) and NECS (National Electronic Clearing Services) which has encouraged individuals and businesses to switch to electronic methods of payment. With the changing times and technology so have changed the methods of payments in India. E-payments in India have been growing at a fast rate of 60% over the last 3 years.

In India ‘plastics’ have been fast over-taking ‘papers’. With 130 million cards in circulation currently, both credit and debit, and an increasing consumer base with disposable income, India is clearly one of the fastest growing countries for payment cards in the Asia-Pacific region. Behavioral patterns of Indian customers are also likely to be influenced by their internet accessibility and usage, which currently is about 32 million PC users, 68% of whom have access to the net. However these statistical indications are far from the reality where customers still prefer to pay "in line" rather than online, with 63% payments still being made in cash. E-payments have to be continuously promoted showing consumers the various routes through which they can make these payments like ATM’s, the internet, mobile phones and drop boxes.

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