Cash transactions of Rs 1 cr-plus must take e-route

The Economic Times 11 Mar. 08 Tuesday P 18 Delhi

IN A step that will force most of the money moving around the country on to the electronic platform, the Reserve Bank of India (RBI) has made it mandatory for all payments above Rs 1 crore, between the entities it regulates, to be routed electronically. At present, there are three modes of electronic payments that are available; real-time gross settlement (RTGS) system, national electronic fund transfer (NEFT) system and the electronic clearing service (ECS). They work as an alternative for the physical mode where cheques are cleared by banks after being processed at a central clearing house.

The latest diktat covers all banks, primary dealers (PDs) and non-banking financial companies (NBFCs). In addition, the central bank has also mandated that all payments of Rs 1 crore and above in RBIregulated markets such as the money market, government securities market and foreign exchange market, be routed electronically. A deadline of April 1, 2008 has been set for both migrations.

RBI had placed a draft proposal for the same on its website on February 18, and invited comments from stakeholders. It has decided to go forward with the implementation, after it found the proposal to be acceptable. On the day the proposal was mooted by the central bank, RBI deputy governor V Leeladhar had said, “If this system works out well, it will give other regulators the confidence to issue similar guidelines.”

According to RBI, these systems have been put in place to ensure the ‘safety and security of the payment system’. There are a large number of bulk payments which are made through paper instruments, and banks face attendant risks of routing such payments which have to under go the process of a clearing cycle.

With thanks from The Economic Times
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