Reserve Bank of India - Department of Payments and Settlements invites suggestions from General Public

 

        Reserve Bank of India, DPSS during the second half of 25^th January 2021 placed on the official RBI Website a 142 pages booklet titled ‘Journey in the Second The decade of the Millennium 2010-20’

This 142-page booklet traces our country’s journey in Payment and Settlement Systems during the second decade of the millennium.

The second decade of the millennium refers to the period between the beginning of 2010 till the end of 2020.

        The booklet is a fascinating journey in capturing the essence of the legal and regulatory environment underpinning the digital payments systems, various enablers, payment options available to consumers, extent of adoption, etc. during 2010 to 2020.

        The earlier booklets on India’s Payment Systems were released by Reserve Bank of India in 1998 and 2008.

This third Booklet in the series is expected to serve as a reference document for the growing interest across the world for the fast-paced developments in India’s digital payment systems.

        To me, these are the most important lines in the whole document: -

        Page 4 – Last Line – Suggestions and Feedback are welcome.

 Email: helpdpss@rbi.org.in

        There is no time limit in which the suggestions and feedback are sought. It is an ongoing process.

        All interested persons can submit their suggestions, provide feedback as and when they pen down their thoughts.

        Disclaimer:  These are my personal views only. The bottom-line is Mission “#LessCashNotCashLess”

Indian Domestic Money Transfer- Norms Relaxation by Reserve Bank of India Will UIDAI/Aadhar number, bridge the gap?

There has been a growing demand to allow non-bank entities to be part of the Domestic Money Transfer mechanism.

The most quoted alternate is MPesa pioneered in Kenya.

The focus of RBI, is on KYC/AML norms. Any domestic money transfer mechanism, should be KYC/AML compliant.  This might seem to be a bit harsh, and the proponents of alternate money transfer mechanisms, see this as the stumbling block in financial inclusion.

However, in the long run, compliance to KYC/AML norms will safeguard the Banks, customers and other participants.

There have numerous representatives to RBI, to open up the formal banking channel to facilitate fund transfers of small value, subject to monthly ceilings and monitoring, to give impetus to the process of financial inclusion.

In this regard, RBI today issued notifications on Domestic Money Transfer - Relaxations vide notification no RBI/2011-12/213 DPSS.PD.CO.No. 62/02.27.019/2011-2012 dt,October 5, 2011.

The notification can be viewed @

http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6750&Mode=0

The relaxations will not give  impetus to the money transfer facilities in the country, but also ensure that the financial transfers happen  in a safe, secure and efficient manner across the length and breadth of the country.

Broadly, the relaxations fall under the following three categories:

01) Liberalising the cash pay-out arrangements for amounts being transferred out of bank accounts to beneficiaries not having a bank account and enhancing the transaction cap from the existing limit of Rs. 5,000 to Rs. 10,000 subject to an overall monthly cap of Rs. 25,000 per beneficiary.

02) Enabling walk in customers not having bank account (for instance migrant workers) to transfer funds to bank accounts ( of say family members or others) subject to a transaction limit of Rs. 5,000 and a monthly cap of Rs. 25,000 per remitter.

03) Enabling transfer of funds among domestic debit/credit/pre-paid cards subject to the same transaction/monthly cap as at (b) above.

The operational instructions are in a separate Annex.  

Banks/ non-banks may adhere to the following while enabling the domestic fund transfers enumerated above.

a) A robust risk and fraud management system in place which will include reporting of suspicious transactions to the appropriate authorities.

b) Such fund transfers are expected to be effected on a real/near real time basis.

c) The total outstanding amount on a prepaid payment instrument shall not at any point of time exceed the limits prescribed in the extant guidelines on the RBI on the policy guidelines for issuance and operation of prepaid payment instruments.

d) Inter-bank settlement of funds shall be effected using RBI approved payment systems only.

e) On charges, the same should be reasonable, i.e a balance between the cost of the scheme and the charge paying capacity of the target audience.

f) Banks/non-banks may put in place appropriate systems for redressal of customer grievances.

g) The customer grievances under the Domestic Money Transfer Scheme will also be part of the Reserve Bank of India’s Banking Ombudsman Scheme.

The key aspect of the relaxations is the  monthly cap restriction.

The participants under the Domestic Money Transfer Scheme, have to devise ways to ensure that the transactions do not breach the monthly cap norm.

Cash-Out - Monthly cap - Rs25,000/- per beneficiary.

Cash-In - Monthly cap - Rs25,000/- per remitter.  

In my view, the Rs25,000/- cap per beneficiary or per remitter monitoring has to be done  not   Payment System Provider wise, but the complete industry wise.

Eg: Cash- Out Monthly  cap - Rs25,000/- per beneficiary.

Can  Beneficiary A receive money from 10 remitter’s in excess of Rs25,000/- in a month. If the limit is breached, what will be the monitoring mechanism?

The key question, is what will be unique identifier to ensure that the cap on the remitter is not breached.

Here, the UIDAI/Aadhar number can fill in the gap.

The process flow :

a) The transaction is originated with the UIDAI/Aadhar number

b) The UIDAI/Aadhar number is verified at the  UIDAI server and the transaction tagged to the UIDAI/Aadhar number.

c) Subsequent transactions are tagged to the respective UIDAI/Aadhar number, and in case the monetary limit is breached, the transaction can be  denied.

Benefits:

01) UIDAI/Aadhar number is expected to be issued to majority of our countrymen and is also expected to be the game changer for financial inclusion.

02) The start can be made now. Yes, initial investments will be required at all levels. This will be one-time investments and the infrastructure can be utilised for other purposes.

03) Tagging of financial transactions to UIDAI/Aadhar number, will reduce the investments in risk management of individual Payment System Providers. Each Payment System Provider, need not develop individual tools, but utilise the UIDAI/Aadhar number tool.

04) Risk Management can be automated, and manual intervention will be required only for exceptional cases.

Security Issues and Risk mitigation measures related to Card Present (CP) transactions – Indian

In continuation of report of WORKING GROUP ON SECURING CARD PRESENT TRANSACTIONS, submitted to RBI on 31/05/2011, RBI, DPSS has started to roll out security measures for ‘Card Present Transactions’.

RBI, DPSS has issued a notification on 22/09/2011, and laid down 3 tasks , for adoption by the various players, in the Cards Industry.

The Press Release can be accessed @ RBI 22 Sept

Broadly the points are :

1. Introduce additional security features for CP (Card Present) transactions. It has been observed, that the reported frauds for CP (Card Present) transactions too are on the rise. This is especially for Credit Cards, which are not yet protected by PIN (Personal Identification Number)
2. One of the options, before RBI  was to adopt e  Aadhaar-based biometric authentication as a second factor of authentication for card present transactions. This option would be reviewed towards the end of December, 2012, to assess the need for a complete switch over to EMV Chip and PIN Technology for card based transactions.
3. (Unique Key per terminal- UKPT or Derived Unique Key per transaction- DUKPT/ Terminal line encryption- TLE) to be live by September 30, 2013. UKPT is a data encryption tool, adapted world-wide in the Cards industry.

                                                              i.      UKPT is a method of generating new keys for use in the DES algorithm from an initial key called a generating or derivation key. This method uses a unique key for every encryption operation and is identified for the decryptor by a serial number combined with an encryption cycle counter, enabling the decryptor to calculate the current key.

4. Enablement of all POS terminals to accept debit card transactions with PIN by June 30, 2013
5. Issuers to be  ready from technical perspective to issue EMV Cards by June 30,2013
6. For international transactions, EMV Chip Card and PIN to be issued to customers who have evidenced at least one purchase using their debit/credit card in a foreign location.

EMV stands for Europay, MasterCard and VISA card standard. It is a global standard based on joint effort by Europay, Mastercard and Visa. Hence, the name EMV.

Europay has been absorbed by Mastercard, in 2002.

EMV cards can be contact based or contactless based.

The main advantages of EMV Contact or EMV Contactless Cards are :

01)  EMV Cards are more secure, than normal cards that rely on data encoded in a magnetic stripe on the back of the card.

02)  The EMV card features a micro-processing chip that stores cardholder data securely, helping reduce the number of fraudulent transactions resulting from counterfeit, lost and stolen cards

03)  A transaction-unique digital seal or signature in the chip proves its authenticity in an offline environment and prevents criminals from using fraudulent payment cards. It is almost impossible to replicate an EMV based card.

04)  Can be used to secure online payment transactions and protect cardholders, merchants and issuers against fraud through a transaction-unique online cryptogram. This is an important security feature, as the numbers of online transactions are increasing day by day

05)  Stores considerably more information than magnetic stripe cards

  The latest trend in EMV cards are dual based i.e the same card can be utilized for ‘Contact’ as well as ‘Contactless’ transactions.

Dishonor of electronic funds transfer for insufficiency of funds in the bank account – clarification

Today Reserve Bank of India, DPSS has issued a clarification on Dishonour of electronic funds transfer for insufficiency of funds in the bank account.

The Press Release can be accessed @ RBI Press Release

The clarification was necessary, as the general market opinion was that on ‘Dishonour of electronic funds transfer for insufficiency of funds in the bank account’, equal protection as under penalties stipulated for dishonor of cheques under the Negotiable Instruments Act, 1881, were not available

Through this clarification, RBI has informed that electronic funds transfer are on par with the penalties stipulated for dishonor of cheques under the Negotiable Instruments Act, 1881.

This clarification should now encourage migration of Loan Payments from the paper-mode to electronic mode.  

It is to be noted, in case of electronic funds transfer i.e Electronic Clearing Services-Debit, the Sponsor Bank can generate the requisite reports in case the ECS transaction is ‘returned.’

As everything moves electronically, the data can be exchanged quickly amongst the various participants in the process.

For an interesting article on the dishonor of cheques under the Negotiable Instruments Act, 1881, please refer here  NI ACT - Dishonor of Cheques

RTGS service charges for members – w.e.f 01/oct/2011. Are you aware of it?

RTGS service charges for members – w.e.f  01/oct/2011. Are you aware of it?

Reserve Bank of India, DPSS, vide Notification No.RBI/2011-12/166,DPSS (CO) RTGS No.388/04.04.002/2011-2012, dt.September 05, 2011, has sought to introduce RTGS Service charges for members.

The notification can be accessed @ http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6698&Mode=0

The main aim for the charges is twofold:-

01)  Recovery of operational costs;

02)  To bring in further efficiency in the operations and the liquidity flows in the RTGS system.

The second one is more important, and the various participants in the RTGS cycle i.e Remitting Banks, Remitting customers, Beneficiary Banks, Beneficiary Banks will take some time to adapt to.

The charges comprise of 3 components,

(i)                 Membership fee,

(ii)               Transaction fee and

(iii)              Time-varying tariff.

Yes, you have read it right, time-varying tariff. Time-varying tariff is common across other service industries, but this is the first of its kind in the banking industry.

  

The time-varying tariff  is as under:-

Block	Time of settlement at the Reserve Bank of India		Charge per transaction
	From	To
1	09:00 hours	12:00 hours	Nil
2	After 12:00 hours	15:30 hours	Rs 1.00
3	After 15:30 hours	17:30 hours	Rs 5.00
4	After 17:30 hours		Rs 10.00

The maximum charges that can be recovered from the customers including the time-varying tariff is,

RTGS Transaction	Maximum customer charges
Inward transactions	Free
Outward transactions
Rs.2 lakh to Rs.5 lakh	Rs.25 + applicable time varying tariff subject to a maximum of Rs.30/-.
Above Rs.5 lakh	Rs.50 + applicable time varying tariff subject to a maximum of Rs.55/-.

In my next post, will discuss in detail about the contents of this notification.

Discretion to customers for selection between RTGS and NEFT – Is it required?

Discretion to customers for selection between RTGS and NEFT – Is it required?

This was waiting to happen. RTGS and NEFT have similar objectives; though a close observations of the same, show that both are different.

Apart from the charges, RTGS is Gross Settlement, whereas NEFT is Batch Settlement. I am sure, by now the Bank customers are familiar with the basic differences between RTGS and NEFT.

As the end goal of RTGS and NEFT was the same i.e movement of funds from one Bank Account to another Bank Account, the customer was not provided the choice to choose between RTGS and NEFT.

Majority of the times, the discretion was with the Bank, either to route it through RTGS or NEFT. This is more so, in case of Internet/Mobile Banking.

To enable the customer to decide the mode of funds transfer between RTGS and NEFT, RBI today released a Notification, stating that the customer should have the option to choose between RTGS and NEFT, at the time of initiation of the funds transfer.

The RBI Notification No is: RBI/2011-12/152 DPSS (CO) EPPD No./274/04.03.01/2011-12 dt. August 12, 2011

The RBI notification can be accessed @

http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6672&Mode=0  

The Banks participating in RTGS/NEFT have been requested to ensure compliance as per the above notification.

There will be a huge impact for the Banks, as the IT infrastructure has to be suitably modified.

The IT Application’s have to be mainly modified in the area of Internet/Mobile Banking arena.

There will be minimal impact on transactions routed through the Branch Desk, as the Desk Officer, can initiate the funds transfer as per customer request. 

Only in case of automated transactions, appropriate modification in the IT Application will be required.  

In the long run, such discretion will aid in increasing the flow of transactions to RTGS/NEFT

RBI - Report on Securing Card Present Transaction - Public Comments

RBI - Report on Securing Card Present Transaction - Public Comments

Reserve Bank of India, DPSS has turned its attention to ‘secure transactions’, of ‘cards present’.

Here cards might be Credit Cards/Debit Cards/ATM Cards/ ATM cum Debit Cards

To increase the security levels for ‘card present transactions’, RBI had constituted a working group in March 2011, to look into all the related issues implementing the security of card transactions in India and suggesting a road map for migration.

The Working Group had members drawn from Banks and Card Companies and also NPCI representatives.

The Working Group in a short span of 8 weeks, submitted its report today i.e 02/06/2011

The Working Group members have to be praised for their perseverance to submit the report within a short period of 8 weeks.

RBI has invited comments to be emailed or forwarded to them, by 30^th June 2, 2011

The Working Group Report can be accessed @ http://www.rbi.org.in/scripts/PublicationReportDetails.aspx?UrlPage=&ID=634

As the electronic money market grows rapidly, it is important that the fraudulent transactions are kept to the minimum, to ensure that the participant’s profitability is not hurt.

It can be noted that the electronic money usage is not only spreading in the urban area, but also spreading in the rural area. The advantages of electronic money are plenty for the rural folks to be attracted towards them.

Over the next month, the report will be discussed thread-bare not only on the internet but also in the print media. 

The more it is discussed, the more comments RBI will receive. The more comments RBI receives, the more robust solution can be found.

By now, articles on the report should have appeared on the Internet.