Gyan Sangam ripple-possible cut in the Credit Card/Debit transaction costs

            The official release of the Bankers Presentation to Shri Narendra Modi is still awaited. However news of the various discussions/thoughts/ideas is slowly trickling down.

            One of the main focus areas was on Cashless transactions. PM Modi has said that  banks in India should compete for achieving maximum cashless transactions, as this would be the "best solution" to the problem of black money.   

            Cashless transactions though on the rise are not popular amongst middle and lower middle class. This applies both to sellers as well as buyers.

            In majority of the medium size business establishments, credit/debit card transactions attract an additional cost of 1.8% to 2.00% of the bill amount.

            The buyers are advised the nearest ATM location, wherein cash can be withdrawn and bill settled.

            Online payment of Utility bills or other travel related transactions attract a convenience fee.

            Such additional costs discourage Cashless transaction in our country and increase cash transactions.

            In the coming months as the Gyan Sangam ideas are put into action, it is expected that a detailed study will be done on ways and means to reduce the Credit Card/Debit Card Transactions costs.

           

            

Gyan Sangam – The Beginning and The End

            The physical 2 days Banking Retreat @ Gyan Sangam NIBM Pune is over. 

            A beginning has been made to revitalize the Public Sector Banks morale.

            The issues are complex and there are no simple answers.

Gyan Sangam is expected to be Annual Retreat.

There is a give and take policy at the Gyan Sangam deliberations.

A dedicated Gyan Sangam website would enable the general public also to participate in this change.

At the end of Gyan Sangam 2015, bankers collectively resolved to improve on five points.

At the same time they demanded some commitment from the government to improve the state of banking in the country.

State Bank of India Chairperson Arundhati Bhattacharya made the presentation to Prime Minister Sri Narendra Modi on behalf of all Bankers.

Quote "We as a group (all public sector banks) have decided to adopt five major resolutions."Unquote

The five points include:

01)  a decision to re-orient the portfolios of small public sector banks to focus on specific and differentiated niches,

02)build people capacities,

03)use of more technology (especially in the top 30 processes),

04)strengthen risk management practises

05) strengthen the partner channels such as business correspondents.

Financial Services Secretary, Hasmukh Adhia, said, "This is something banks have said they will work upon...we have specified no timelines for any of them."

 At the same time, bankers have also asked the government for some commitment which Adhia said will be looked into "positively."

The bankers have requested the government to move from a state-owned structure to a state-linked structure, as recommended by the P.J.Nayak committee report. This would entail, among other things, setting up of a banking bureau comprising of professionals and eminent bankers to appoint and empower individual bank boards.

Other commitments requested by the banks, of the government include:

a)     fully empower banks on human resource related decisions,

b)   creating the right environment for minimal interference,

c)    strengthening the legal framework for recovery of loans,

d)    strengthening and simplify processes for credit insurance,

e)    eliminate debt waivers and

f)    do away with interest rate caps,

g)    and finally creating the enabling infrastructure for digital banking.

Media was not allowed to cover the PM's address. In the coming days, more details are expected to be released to the media.

Indusind Bank ventures into Safe eTransactions-IMPS Branch Channel

             Indusind Bank has become the first bank in our country to offer IMPS transactions through the Bank branch channel.

            IMPS which debuted four years bank was primarily designed for alternate channels mode i.e customers initiate the transactions on their own, without intervention by bank staff.

            As the main advantage of IMPS is 24*7, 365 days delivery, the volumes were going up. Till date, no Indian bank was offering IMPS through the bank branch channel.

            Now, Indusind Bank has started to offer this facility at its branches. Going ahead, other banks too will offer IMPS at their branch.

            The first mover’s advantage will surely go to Indusind Bank.

            Bank staff has to extra vigilant while keying the beneficiary details. IMPS is instant and the RECALL option is simply not feasible.

R I P Indian MICR Houses

            The curtains for the Indian MICR Clearing Houses came down in October 2014. The last of  our country’s 66 MICR Houses was migrated to the CTS Grid and a glorious chapter in India’s payment systems came to an end

            Any Indian with even a slender connection to Banks must have been exposed to  physical cheques along with their associated ups and downs.

            All the 66 MICR Clearing Houses spread all over Indian were merged into the 3 CTS Grids i.e Western, Northern and Southern.

The clearing and settlement are done purely on the basis of image, instead of physical instruments.

The next target would be to migrate the express cheque clearing systems (ECCS) locations to the nearest CTS Grid.

At present ECCS is present in at 1,339 smaller centres. The ECCS application package is used at centres with low volumes and also enables ‘local’ level clearing for participating banks at that centre. As the volumes are low it is not economically feasible to migrate all the 1,339 ECCS Centres to CTS. The top 25 ECCS centres can be migrated to the CTS Grids.

Brief History of MICR Clearing in india:

The need for MICR Clearing in India was felt in the early 1980’s and the first MICR machine in India was installed in Mumbai in 1986.

The solution was the introduction of Magnetic Ink Character Recognition (MICR) based mechanised cheque processing technology.

The existing cheques had to be redesigned incorporating a MICR codeline4 which could be read by document processing machines called reader-sorters.

The RBI introduced two types of reader-sorters - the Medium Speed Reader Sorters, capable of processing 300 instruments per minute for Inter-city instruments and the High Speed Reader Sorter Systems (HSRS) with speeds of 2400 documents per minute, for the clearing of local instruments.

Driven by mainframe computers the HSRS systems were the state-of-the-art systems available at that time. These were installed in Mumbai (1986) followed by Chennai, New Delhi, (1987) and Calcutta(1989).

By the middle of 1989 MICR cheque clearing operations in the four metropolitan cities had become fully operational and stabilised.

Link 1: infosys.com -Evolution-of-cheques-and-paper-based-clearing-in-India

Link 2:  CPSS RedBook

Rest in Peace – Indian MICR Clearing Houses

Grid CTS Centres

2015 – 10 Trends to look out in Safe eTransactions

            In another couple of days, 2014 will move out of our lives, and 2015 will enter our lives.

            The following are the Trends which will dominate Safe eTransactions in India.

Rising Trends

01) Cash Transactions will continue to grow. The channel mode will shift from ATMs to Branch Banking channel

02)eWallets will see a spike. The trend will be on Semi-Closed eWallets and Open eWallets

03)IMPS (Instant Mobile Payment Services) will witness  far-reaching transactions jump

04) Biometric Authentication services will witness new transaction modes being added

05)eTransactions frauds. The law enforcement agencies/customers/banks will be baffled with new strains of eTransactions frauds

06)The rise of Chota ATMs

07)NACH (National Automated Clearing House) will see new corporates as Participants

Declining Trends

01) The average number of ATM financial transactions will fall as the customers try out alternate payment channels

02) ECS (Electronic Clearing Services) volumes  will reduce rapidly by 3^rd quarter

03)Physical cheques volumes will see a fall as bank branches too prefer eTransactions