Payment Systems used in India

Indian Rupee NotesIn any country, central bank stands as a driving force in the development of nationwide payment systems. In India, the central bank i.e, Reserve Bank of India has been employing a developmental role and take several initiatives for a safe, secure and efficient system for payments in the country.

The Reserve Bank has taken many initiatives towards introducing and upgrading safe and efficient modes of payment systems in the country to meet the requirements of the public at large. The dominant features of large geographic spread of the country and the vast network of branches of the Indian banking system require the logistics of collection and delivery of paper instruments. These aspects of the banking structure in the country have always been kept in mind while developing the payment systems.

The following are payments types that shall be used in India paper-based instruments(cheques, drafts), electronic instruments and other instruments, such as pre-paid systems, mobile banking, ATM-based, Point-of-sale terminals, online transactions.

ATMAlso read: What is BNA?

The Board for Regulation and Supervision of Payment and Settlement Systems (BPSS), a sub-committee of the Central Board of the Reserve Bank of India is the highest policy-making body on payment systems in India. The BPSS is empowered for authorising, prescribing policies and setting standards for regulating and supervising all the payment and settlement systems. The Department of Payment and Settlement Systems of the Reserve Bank of India serves as the Secretariat to the Board and executes its directions.

In India, the payment and settlement systems are regulated by the Payment and Settlement Systems Act, 2007 (PSS Act) which was legislated in December 2007. The PSS Act as well as the Payment and Settlement System Regulations, 2008 framed thereunder came into effect from August 12, 2008. In terms of Section 4 of the PSS Act, no person other than the Reserve Bank of India (RBI) can commence or operate a payment system in India unless authorised by RBI. The Reserve Bank has since authorised payment system operators of pre-paid payment instruments, card schemes, cross-border in-bound money transfers, Automated Teller Machine (ATM) networks and centralised clearing arrangements.

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A. Sulthan

Author and Assitant Professor in Finance

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