The urgent need for strengthening the legal infrastructure covering the payment and settlement system of Indian banking was stressed on by speakers at a three-day seminar organised here by the Institute for Development and Research in Banking Technology (IDRBT).
While R H Patil, chairman of the Clearing Corporation of India Ltd, in his inaugural speech favoured a new comprehensive enactment covering the payment system on the lines of the one recently adopted in Australia, K R Ganapathy, chief general manager (information technology) Reserve Bank of India (RBI), announced that the draft of the proposed Indian Payment Systems Regulation Bill will be ready "shortly" and this could form the basis for a legal framework.
The seminar, organised in collaboration with RBI and the Bank for International Settlements, aims at providing a platform for central banks of the South Asian Association for Regional Cooperation (Saarc) and south east Asian countries to exchange views on the payment system reforms, process in their individual countries on the role of the respective central banks in managing changes in payment systems and on how developments in the region could be linked with broader global trends.
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Ganapathy also announced that the mechanised cheque processing system now confined to 20 centres in the country will be extended to 10 more centres by the year-end. He said that when the initial financial networking through IDRBT was initiated in 1996, V-sat was considered adequate. But the volume of transactions now require a blend of V-sats and leased lines. This will be operational in four months time and will cover 21 major centres where the RBI has its offices.
The RBI senior executive regretted that the retail electronic funds transfer system introduced initially in the four metros and later extended to four other cities has not been picking up to the anticipated level. The central bank was in talks with the Indian Banks' Association on ways of popularising electronic retailing.
Patil explained that in the absence of a comprehensive enactment covering settlements and payments, they were taking refuge under the Indian Contracts Act and asking all clearing houses to enter into agreements laying down conditions to ensure settlement guarantees. But here they also get into problems where the income-tax department freezes the assets which nullifies any guarantee provided in the agreement.