RBI as a Responsible Regulator

Report
Indian Payment and Settlement Systems
Responsible Innovation and Regulation
IDRBT Banking Technology
Excellence Awards 2011-12
Hyderabad
August 3, 2012
Dr. Duvvuri Subbarao
Governor
Reserve Bank of India
1
Financial Innovation in the
Context of the Crisis
• The crisis has triggered a number of
questions about financial innovation
• The big lesson is that both
innovators and regulators will have
to more ‘responsible’
2
Payment and Settlement
Systems
Why have I chose to speak about
responsible innovation and
regulation in payment and
settlement systems?
3
RBI as a Responsible
Regulator
RBI values financial innovations that
• improve the efficiency of financial
intermediation
• do not erode financial stability
• do not compromise customer interest
• further financial inclusion
4
RBI as a Responsible
Regulator
• PSS Act, 2007, designates Reserve
Bank as the statutory regulator of the
payment and settlement systems
• Even as the regulator, RBI continues to
take the lead in facilitating innovation
5
Topics I will Cover
• RBI’s role in modernizing payment
systems
• RBI’s approach to responsible
regulation
• RBI’s role as facilitator of innovation
6
RBIs Role in Modernising Payment Systems
Paper Based Clearing
• Introduction of MICR technology in the mid 80s
• Introduction of Speed Clearing for outstation
cheques in 2008
• Cheque Truncation System (CTS) in Delhi in
2008
• Grid-based CTS in Chennai in 2011
7
RBIs Role in Modernising Payment Systems
Electronic Payment Systems
Retail electronic payment systems:
- ECS for bulk retail payment transactions
- EFT for one-to-one payments
Today
- ECS has transformed into NECS
- EFT has transformed into NEFT
8
RBIs Role in Modernising Payment Systems
Real Time Gross Settlement (RTGS)
• RTGS was introduced in 2004 as a large
value payment system
• Huge expansion in turnover since then,
both in value and volume terms
9
RBI’s Approach to Responsible
Regulation
Think Global, Act Local
10
RBI’s Approach to Responsible Regulation
Leveraging on Non-Banks
• Non-banks allowed to enter the retail
payment space
• Now, non-bank also allowed to set up
"White Label ATMs"
11
RBI’s Approach to Responsible Regulation
Promoting Safety and Security
of Payment Instruments
• Security of online card transactions
• Implementing CTS2010 standards
• Immobilizing cash retraction facility in
ATMs
12
RBI’s Approach to Responsible Regulation
Customer Centric Regulation
• Disputed amounts in failed ATM transactions
should be credited within seven days
• Introduction of differential MDR to encourage
debit card transactions
• Helping migrant population - domestic personto-person fund transfers
13
RBI as a Facilitator of
Innovation in Payment Systems
Introduction of New Payment Products
• Remarkable growth in new payment
products and access channels
• Regulatory initiatives in the area of prepaid instruments
• Operating guidelines on mobile banking
14
RBI as a Facilitator of
Innovation in Payment Systems
Aadhaar Initiative in Payment Systems
• Transfer of benefits by Government
to beneficiaries through Aadhar
enabled electronic payment systems.
• This will reduce cost, time and
leakages.
15
RBI as a Facilitator of
Innovation in Payment Systems
Mobile Financial Services
• Around the world, two models:
- bank-led model
- non-bank led model
• India has opted for the bank-led
model
• Why?
16
RBI as a Facilitator of
Innovation in Payment Systems
Focus on Central Clearing
• Express preference for central clearing
arrangement for large value interbank
transactions wherever feasible
• CCIL set up in 2001 to act as a central
counterparty (CCP)
17
RBI as a Facilitator of
Innovation in Payment Systems
Institution Building
RBI promoted
• The Clearing Corporation of India (CCIL)
• Institute for Development and Research in
Banking Technology (IDRBT)
• National Payments Corporation of India
(NPCI)
18
Taking Stock
Where do we stand?
• Large value payment systems have
shifted to electronic mode.
• Retail payment systems are still largely
paper centric.
• Why this lag?
19
Why are Retail Payment Systems
Still Paper Centric?
• Slow pace of infrastructure building
• Limited product innovation
• Lack of initiative by banks
20
Conclusion
• ‘Adopt’ world’s best practices
• ‘Adapt’ them to the Indian environment
• Vision Document (2012-15) by RBI
21
Conclusion
Responsible Innovation and Regulation
Innovators - ‘Push the envelope’
Regulators - Make sure the envelope
is sturdy and strong
22

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