Leeladhar flays banks for poor RTGS system

Deputy Governor of Reserve Bank of India (RBI) V Leeladhar has strongly criticised Indian banks for not implementing various technology measures initiated by the banking regulator.

The banks have failed to effectively implement 'real time gross settlement'(RTGS), a payment and settlement system through national electronic fund transfer (NEFT), thereby not making use of the technology available to help customers as well as increase their own business, he said.

Inaugurating 125 new ATMs set up by Canara Bank here today, he said, "The biggest challenge before the Indian banking system is an effective, viable and robust payment, and settlement system which can be its strength."

While the Indian software companies are helping the whole world by providing software to move from cash payment to electronic payment, it is unfortunate that the Indian banks are not making use of this technology advantage, he said, adding, "There is a need to leapfrog in making use of the technology."

"There is no awareness among the customers about this facility. I regret to inform that the banks have failed to explain to their customers to use RTGS to make payments," Leeladhar said. He, however, pointed out that the foreign banks functioning in India are making effective use of RTGS.

RBI has invested Rs 150 crore to put in place this system and is provided the facility to banks totally free of cost. The RTGS system helps to transfer funds electronically from one place to another in just about two hours as against the traditional system which takes nearly 15 days. RTGS can help electronically transfer nearly Rs 1 lakh crore every day.

The RTGS system can take one lakh transactions per day, while the banks are effecting only 15,000 transactions per day, of which 13,000 are inter-bank transactions. Transactions made through the current NEFT (national electronic fund transfer) are just 18,000 per day, he said, adding that "Indian banks need to change their mindblocks towards the usage of technology and the customers should demand this facility."

The banks should stop worrying about losing 'float money' in implementing RTGS and provide the benefit to customers. The float is the time between a customer issuing a payment and the beneficiary actually receiving it. This is the 'float' or the interest free deposit the bank enjoys.

Leeladhar said RBI is hopeful of implementing the cheque truncation system in six banks from the end-April. Presently, the pilot project is underway at the national capital region of Delhi.

Once this system gets going a customer can get payment of an outstation cheque in a moment. Currently, there is an understanding between the banks and the customers issuing payments whereby the issuer knows he will enjoy the funds during the 'collection' period and the bank will enjoy the interest free deposit.