Reserve Bank of India sets out blueprint for overhaul of national payments system

The Reserve Bank of India has set out aspirations for a top-to-toe overhaul of the country's payment systems, including plans for a new domestic card scheme, the creation of a mobile money network, and the introduction of a UK-styled Faster Payments system.
The central bank blueprint lists five major infrastructure projects designed to bring the country's payment systems into line with international standards and lay the foundations for the switch to a digital economy.

At the inter-bank level, the RBI says it will introduce a new and feature rich real-time gross system capable of using advances in technology to provide scalability in volumes, operational felxibility and more efficient use of liquidity.

The central bank is additionally considering proposals to extend the operating hours of the National Electronic Funds Transfer Network - which currently runs during weekdays from 9am to 5pm and on Saturdays from 9am to 12noon - to a 24x7 service. As an alternative, the bank says it may instead pursue the development of a new round-the-clock network "akin to the Faster Payments Service in the UK".

At the same time, the bank is also examing the case for building a new technology ACH network by totally redesigning the existing electronic clearing system in order to provide "end-to-end processing in a straight-through manner".

In the cards market, the RBI proposes a new domestic card initiative - dubbed India card - and the creation of a POS switch network for issuance and acceptance of payment cards.

"The need for such a system arises from two major considerations," states the bank. "(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."

The RBI also has its sights set on the emergence of mobile phones as an important channel for transmission of payment instructions. It notes that currently all inter-bank mobile transfers are payment instructions for settling funds through existing payment systems. Looking ahead, it posits the creation of a dedicated real-time mobile payments settlement network.

"Efficient mobile payments would require real time transfer of funds with adequate security," states the bank. "This would require building a national infrastructure for facilitating real time mobile payments."