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.

Dispute Resolution Mechanism under the Payment and Settlement Systems Act, 2007

Dispute Resolution Mechanism under the Payment and Settlement Systems Act, 2007

As the numbers of transactions in the Payment Systems are on the increase, it is but natural that the complaints too should rise.

A number of complaints found their way to Reserve Bank of India, DPSS for an amicable solution.

To bring in Uniformity and transparency amongst the Dispute Settlements, RBI DPSS has issued detailed guidelines.

The same can be accessed @

http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6009&Mode=0

The relevant Notification Number is:  RBI/2010-11/213/DPSS.CO.CHD.No.654/03.01.03/2010-2011 dt.         September 24, 2010

QUOTE

01) Scope of the Dispute Resolution Mechanism will generally be limited to interpretation, scrutiny and resolution of disputes within the ambit of rules, regulations, operational and procedural guidelines relating to the payment products, various instructions issued by the system providers, instructions and directions issued by RBI, etc., from time to time.

02) Use of the mechanism will not be resorted

a) to deal with aspects relating to acts of system participants (or providers) that are prima-facie fraudulent or

b) are internal to their operations or

c) outside the payment and settlement system infrastructure.

03) The Dispute Resolution Mechanism will also not cover disputes

a) between system participants and their customers (ultimate users),

b) between members of the payment systems and their sub-members

c) or between sub-members themselves.

UNQUOTE

The highlights of this Notification are:-

The various products under the Payments and Settlement Systems are divided into 3 broad areas viz:-

a) Clearing House-related activities, including paper (cheques) and retail electronic (ECS) payment products

b) Products those are national in character viz. National Electronic Clearing Service (NECS), National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement (RTGS) system

c) All other payment systems (other than those operated by RBI) like CCIL, NPCI, ATM networks, cross border money transfers, cards, etc.

The PRD (Panel for Resolution of Disputes) should dispose of the dispute, within 15 working days of receiving the same.

Likewise, the Appellate authority too has to dispose of the Appeals, within 15 working days.

            The Dispute Resolution mechanism should lead to greater understanding of the functioning of the Payments and Settlements Act 2007, amongst all the state-holders. As more and more Disputes are resolved, the efficiency of the Payments System will increase. This will attract new customers and new transactions, into the Payment Systems ambit.

ID Holiday for RTGS/NEFT on 21st September, 2009, Monday

ID Holiday for RTGS/NEFT on 21st September, 2009, Monday

RTGS Holiday - Year 2009

Sl. No.	Date	Day	Occasion
8.	September 21, 2009	Monday	Ramzan ID

21^st September, 2009, Monday is a Holiday for ePayments-RTGS and NEFT in India.

On a RTGS Holiday, NEFT too is automatically closed.

This means ep will be closed consecutively for 2 days in a row.

Hence, there will be heavy volumes on 22^nd September, 2009.

To minimize the inconvenience of the Holidays, viewers might find these tips useful:-

RTGS-

• Execute your Transactions on 19^th September, 2009 by 12noon, so, Returns if any, will come back on 19^th itself.

NEFT-

• Execute your Transactions on 19^th September, 2009 by 10 am, so, Returns if any, will come back on 19^th itself.
• There will be only 3 NEFT Settlement Cycles on on 19^th September, 2009, as it is a Saturday. The Settlement Cycles will take place at 9.00am, 11.00am and 12.00noon.
• Try to avoid NEFT transactions on 20^th and 21^st, through Net/Mobile Banking. Such transactions will be in queue and executed only on 22^nd. In the meanwhile, if there is a change of plans, it will be difficult to cancel the pending transactions.

Enjoy the Holidays

Meal Cards – ING Vysya Bank-a new player

Meal Cards – ING Vysya Bank a new player

ING Vysya Bank, a Leading Private Sector Bank has introduced the Meal Card.

A brief articles of the occasion can be accessed at

http://www.thehindubusinessline.com/2009/08/22/stories/2009082251460600.htm

ING Vysya Bank’s Meal Card will be accepted at all Maestro Merchant Establishments.

It is be noted that in India, Meal Cards are being mainly issued by Private Banks. So far, no Public Sector Bank has introduced the Meal Card.

My guess is State Bank of India, Union Bank of India, Andhra Bank, might take the lead. Or Bank of Baroda, too could.

Let us wait and see, which of the Public Sector Banks, takes the lead.

What is a Meal Card:

Meal Card is a prepaid card designed to replace the inefficient paper voucher system in the market.

It is a far more operationally efficient way to provide your employees with a meal allowance and eliminates the logistical hassles associated with the procurement, stock-keeping and distribution of paper-based Meal Vouchers.

Meal Card’s	Paper Based Vouchers
1. No operational hassles in distribution to employees, issued once and reloaded again and again without any trouble	Monthly distribution of paper coupons, keeping track of stock and reconciliation together give rise to an operation nightmare.
2. Larger acceptance, freedom to use the card at almost 40,000 food and beverage outlets in the MasterCard network.	Limited access to only the few outlets specifically accepting such paper based coupons
3. Easier to handle, the Meal Card is a plastic card to be carried along with your normal debit and credit cards and presented for use anytime you need to pay for some food or beverage items.	Carrying the booklet of vouchers around, counting vouchers every time you need to pay for something is an unnecessary burden best avoided
4. Use your Meal Card for any denomination you want, don't worry if the amount is an odd amount	The Paper vouchers come in specific denominations and while paying you have to pay in those denominations thus resulting at times in loss of some change. Seen in accumulation this change comes quite a large amount, sometimes even the cost of a good meal.

Reserve Bank of India, has already laid down guideline regarding Issuance and Operation of Pre-paid Payment Instruments in India (Reserve Bank) Directions, 2009

The complete Document can be accessed at

http://rbidocs.rbi.org.in/rdocs/notification/PDFs/RFGF280409.pdf

In brief, the RBI guidelines for clients affiliates and users

The RBI released the "Insurance and Operation of Pre-Paid Payment Instruments in India (Reserve Bank) Direction 2009" on April 27, 2009. These rules have become operative from July 27, 2009.

Accordingly, the Customers and Affiliates are required to comply with the following:

1. Institutions are required to maintain the full details of beneficiaries to whom Vouchers/Payment Instruments are issued.

2. Payment instruments upto Rs 50,000/- can be issued by you provided full KYC of the employee or beneficiary has been completed as prescribed by RBI guidelines.

3. Payment instruments can be issued upto Rs 50,000/- by carrying out customer due diligence. This should be done by companies/institutions by ensuring that they keep full details of the employees/beneficiaries to whom the payment instruments are issued.

4. Customers should make advance payment as the same needs to be deposited in Escrow Account on issuance of vouchers.

5. Customers and Affiliates need to comply with the Know Your Customer / Anti-Money Laundering & Combating Financing of Terrorism Guidelines issued by RBI.

However, recently Income Tax Department has issued guidelines, which might reflect on the growth of Meal Cards in our country.

RTGS Volumes January 09 to June 2009.

RTGS Volumes January  09 to June 2009.
Today’s post is regarding the Customer Volumes in RTGS from January 2009 to June 2009. 

 

The data is only Customer Transactions only, as for the layman only customer transactions are important, and not inter-bank transactions.

A basic analysis of the data leads to some interesting observations 

01)The volumes are increasing rapidly. 

 02)As the financial year, closes in Mar, there were heavy transactions in Mar 09.
03)The decrease in April 09, was compensated in May 09.
04)As compared to Feb 09 transactions, the Mar 09 transactions improved by 30%
05)No of transactions in June 09, as compared to Jan 09, increased by 20%.

The increase in the transactions is a positive indicator for ePayments in our country.
However, these transactions are only a fraction of the payments pie, and ePayments, have a long way to go.

Small steps lead to the GOAL

National Electronic Funds Transfer(NEFT) System-Business Continuity Plan

National Electronic Funds Transfer(NEFT) System-Business Continuity Plan

On 29^th July, 2009, Reserve Bank of India, DPSS, issued a Notification, (RBI/2009-10/108 DPSS (CO) EPPD No.192 / 04.03.02 / 2009-10 dated July 29, 2009), stressing on the need for Business Continuity Plan in National Electronic Funds Transfer (NEFT) System, of our country.

The complete Notification can be accessed at

http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=5191&Mode=0

The tremendous growth in NEFT Transactions in our country, heightens   the need for a effective BCP for NEFT.

Business Continuity is the ability of a business to continue its operations with minimal disruption or downtime in the advent of natural or intentional disasters. BC begins with a plan that addresses all risks and secures systems that are vital to business operations.

A good BCP must factor in all the risks, and should ensure continued availability, reliability, and recoverability of resources. It should balance the costs of risk management with the opportunity cost of not taking appropriate action.

Till now, the BCP drills used take place IDBRT and RBI’s NEFT Back-up site. Now, Reserve Bank of India, desires that Banks too should be part of such drills, atleast once in a quarter.

Of course, the costs for back-up site should not discourage Banks, in having a effective BCP in place. Innovative strategies like sharing of resources, between Banks, can 01) Bring down costs 02) Ensure adequate Trained Staff at BCP Locations.

A good BCP can act as a motivator, for the common folk, to switch over to ePayments.   

Tit-Bits Committee on Payment and Settlement Systems broadens its membership

Committee on Payment and Settlement Systems broadens its membership

ON 24^th July, 2009, Reserve Bank of India India, joined the select club of Committee on Payment and Settlement Systems (CPSS).

CPSS is part of BIS (Bank for International Settlements)

The above step will enable our country, to be part of the latest developments in ePayments. At the same time, the experience-sharing with old and new members, will aid the Indian ePayments Players, to avoid the pit-falls, for a smooth ePayments ride.

New Members which joined CPSS on 24^th July, 2009 are the central banks of Australia, Brazil, China, India, Mexico, Russia, Saudi Arabia, South Africa and South Korea.

With its newest members, the CPSS now consists of representatives from Australia, Belgium, Brazil, Canada, China, the European Central Bank, France, Germany, Hong Kong SAR, India, Italy, Japan, Mexico, the Netherlands, Russia, Saudi Arabia, Singapore, South Africa, South Korea, Sweden, Switzerland, the United Kingdom and the United States.

The expansion will enhance the Committee’s ability to contribute to financial stability through improvements to the global payments and settlement infrastructure.

The expansion will also help the Committee keep oversight practices and standards in line with market developments and with increasing interdependencies among financial market infrastructures.

QUOTE

About the Committee on Payment and Settlement Systems

The CPSS serves as a forum for central banks to monitor and analyse developments in domestic payment, clearing and settlement systems as well as in cross-border and multicurrency settlement schemes. The chairman of the Committee is William C Dudley, President of the Federal Reserve Bank of New York. The CPSS secretariat is hosted by the BIS.

UNQUOTE

The ‘Red Book’, published by CPSS can said to be the most authoritative annual publication that provides data on payments and payment systems in a large set of industrial countries.

Increase in RTGS timings-Is it required

Increase in RTGS timings-Is it required

Banks may change timings if bourses extend trading

At present RTGS Session Time on week ends is 9.00am to 6.00pm, and than again 7.00pm to 7.30pm

However, the above timings may have to be revised if SEBI, decides to incrae the market hours of trading in exchanges. The Securities and Exchange Board of India had placed a discussion paper titled “Increase in market hours of trading in exchanges” on its Web site on March 19 for seeking public comments.

Mr Namo Narain Meena, Minister of State for Finance, told the Lok Sabha in a written reply, on 24^th July, 2009 that Banks and other financial institutions are likely to change their timings if the capital market regulator were to allow stock exchanges to extend their trading hours, the Lok Sabha was informed today.

At present, the longest RTGS Session time is in New Zealand, i.e 23 hours 30 minutes on week days.

Surprised, for confirmation just visit this link

http://www.emeap.org/emeapdb/upload\Publications\rtgs.pdf

However, it is to be seen, if there will be increase in customer session timings or only inter-bank session timings, or will the settlement sessions take place, with breaks in between.