"The total volume of retail electronic payments witnessed about nine-fold increase over the last five years," RBI Governor Shaktikanta Das had said in his keynote address at NITI Aayog's FinTech Conclave in March. The regulator is now looking to build on this success with its latest vision document for payment and settlement systems, which outlines the road map for 2019 to 2021.
The core theme of the document is 'Empowering Exceptional (E)payment Experience', and the aim is to achieve "a highly digital and cash-lite society" through the four goal posts, namely competition, cost effectiveness, convenience and confidence, or the 4Cs.
According to the RBI, specific thrust areas such as creating regulatory sandbox, and authorising new players have been incorporated to enhance competition, and this, along with the presence of multiple players in the market, is expected to achieve optimal cost for customers. Simultaneously, the availability of multiple anytime-anywhere payment systems while ensuring a 'no-compromise' approach towards the safety of these options will take care of the convenience and confidence angles.
In line with the above goal posts, especially on the convenience aspect, the vision document proposes to examine the "need for extending availability of NEFT on a 24x7 basis to facilitate beyond the banking hour fund transfer needs" as well as adding more features to this payment system, including faster settlements and staggered payments. "Reserve Bank would examine the need to consider uninterrupted and round-the-clock availability of various payment systems; gradual enhancement of limits, including differential day-night, holiday limits for transactions, subject to risk management and liquidity management; etc," the document stated. The regulator further intends to examine the possibility of extending the timings for RTGS transactions "based on industry preparedness and customer demand".
What is NEFT?
National Electronic Funds Transfer (NEFT) is a nation-wide retail payment system facilitating one-to-one funds transfers. Managed by the RBI, this option allows any individual or firm to electronically transfer funds from any NEFT-enabled bank branch to another party having an account with any other bank branch participating in the Scheme. All banks boasting the 11-digit IFSC or Indian Financial System Code - it will be clearly displayed in your cheque books - are participating in the NEFT system.
Besides personal funds transfer, the NEFT system can also be used other transactions such as premium renewal, payment of credit card bills and paying loan EMIs. "Even individuals who do not have a bank account (walk-in customers) can also deposit cash at the NEFT-enabled branches with instructions to transfer funds using NEFT. However, such cash remittances will be restricted to a maximum of Rs 50,000 per transaction," the RBI explains in its website.
The system currently provides for batch settlements at half-hourly intervals during its operating hours - from 8 am to 7 pm on all working days of week, except the second and fourth Saturdays of the month. Some banks, like ICICI Bank and HDFC Bank, limit NEFT timings to 6.30 pm. "The beneficiary can expect to get credit for the NEFT transactions within two business hours from the batch in which the transaction was settled," the apex bank added.
What is RTGS and how is it different from NEFT?
The Real Time Gross Settlement (RTGS) system is primarily meant for large value transactions, with the minimum cap set at Rs 2 lakh. In this option, there is continuous and real-time settlement of fund-transfers, individually on a transaction by transaction basis, unlike NEFT which clears transactions in batches. However it is not a 24x7 system. The RTGS service window for customer transactions is available to banks from 8 am to 4 pm or 4.30 pm on a working day, for settlement at the RBI end.
How much money can be transferred on these electronic payment systems?
While the RBI has not specified any caps on the amount of funds that can be transferred using NEFT and RTGS, banks have set their own maximum limits. For instance, SBI and ICICI Bank cap the maximum amount for NEFT and RTGS transactions under retail banking at Rs 10 lakh. There is no minimum limit for NEFT, but RTGS transactions have to be Rs 2 lakh or over. On the other hand, HDFC Bank limits the amount for online NEFT and RTGS (netbanking) transfers at Rs 25 lakh while there are no caps for such transfers from bank branches. SBI's maximum NEFT/RTGS limit for corporates is much higher at Rs 50 lakh for small and medium enterprises and Rs 2,000 crore for large corporates.
Is there no 24x7 option currently?
Immediate Payment Services, or IMPS, which is managed by the National Payments Corporation of India (NPCI), is currently the only payment option that is available 24x7, throughout the year including Sundays and any bank holiday. However, the maximum amount that can be transferred is much lower than NEFT and RTGS - Rs 2 lakh per day for most banks.
Hence, the RBI proposal to make NEFT 24x7 could give a major push to e-payments. Among the specific outcomes listed in the vision document, the RBI sees payment systems like IMPS/UPI registering average annualised growth of over 100% and NEFT at 40% till 2021. The number of digital transactions is expected to increase more than four times from 2069 crore in the period under review while the volume of cheque-based payments is expected to dip to under 2% of the retail electronic transactions.
What are the charges involved?
While inward NEFT transactions at destination bank branches, or credit to beneficiary accounts, are free, banks impose a fee of Rs 2.50 to Rs 15, plus GST, on outward transactions depending on the amount. Similarly, outward RTGS transactions incur a fee of Rs 25-50 plus applicable GST. The charges on IMPS range from Rs 5 plus GST for amounts up to Rs 1 lakh to Rs 15 plus GST for higher amounts.
"While the approach of the RBI will continue to be of minimal intervention in the pricing of charges to customers for digital payments, all efforts will be made towards facilitating the operation of payment systems which are efficient and price-attractive," the vision document stated. The basis shall have to be that pricing is reasonable to encourage usage and also pass-on to the customer the benefit of cost saved on managing cash in the system, it added.
With PTI inputs