Payment, clearing and settlement systems in India

[Pages:59]Payment, clearing and settlement systems in

India

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India

Contents

List of abbreviations..............................................................................................................151 Introduction ...........................................................................................................................153 1. Institutional aspects.....................................................................................................154

1.1 The institutional framework ................................................................................154 1.1.1 Regulatory institutions...............................................................................154 1.1.2 Legal framework .......................................................................................156

1.2 The role of the central bank ...............................................................................158 1.2.1 Note issuance ...........................................................................................158 1.2.2 Payment and settlement services .............................................................158 1.2.3 Oversight...................................................................................................162 1.2.4 Cooperation with other institutions............................................................163

1.3 The role of other private and public sector bodies .............................................164 1.3.1 The Indian Banks' Association..................................................................165 1.3.2 The Clearing Corporation of India Limited ................................................165 1.3.3 India Post ..................................................................................................166 1.3.4 The Institute for Development and Research in Banking Technology ......166 1.3.5 National Payments Corporation of India ...................................................166 1.3.6 Foreign Exchange Dealer's Association of India ......................................166 1.3.7 Fixed Income Money Market and Derivatives Association of India...........167 1.3.8 The stock exchanges ................................................................................167 1.3.9 Securities depositories..............................................................................167

2. Payment media used by non-banks ............................................................................168 2.1 Cash payments ..................................................................................................168 2.2 Non-cash payments ...........................................................................................168 2.2.1 Cheques....................................................................................................168 2.2.2 Credit transfers .........................................................................................169 2.2.3 Direct debit................................................................................................169 2.2.4 Payment cards ..........................................................................................170 2.2.5 Point of sale (POS) infrastructure .............................................................171 2.2.6 ATM infrastructure and services ...............................................................171 2.2.7 Postal orders, money orders and retail services from India Post..............172 2.3 Recent developments ........................................................................................173 2.3.1 Rationalisation of service charges ............................................................173 2.3.2 Mandatory use of electronic mode of funds transfer.................................173 2.3.3 Internet/mobile phone banking..................................................................173

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2.3.4 Remittance services................................................................................. 174 2.3.5 Role of intermediaries .............................................................................. 174 3. Payment systems (funds transfer systems)................................................................ 175 3.1 General overview .............................................................................................. 175 3.2 Real-time gross settlement system ................................................................... 176 3.2.1 Operating rules......................................................................................... 176 3.2.2 Participants .............................................................................................. 177 3.2.3 RTGS transaction types ........................................................................... 177 3.2.4 Settlement procedure and liquidity support.............................................. 177 3.2.5 Transaction processing environment ....................................................... 178 3.2.6 The RTGS system process flow............................................................... 178 3.2.7 Credit and liquidity risk ............................................................................. 178 3.2.8 Pricing ...................................................................................................... 179 3.2.9 Statistics................................................................................................... 179 3.3 Exchange and settlement system for foreign exchange transactions ............... 179 3.3.1 Ownership, governance and regulatory status of CCIL ........................... 179 3.3.2 Participants .............................................................................................. 180 3.3.3 Transactions handled............................................................................... 180 3.3.4 System operating procedure .................................................................... 181 3.3.5 Clearing of trades and settlement obligations .......................................... 181 3.3.6 Settlement procedure............................................................................... 181 3.3.7 Risk management .................................................................................... 182 3.3.8 Cross-currency CLS-eligible trades ......................................................... 183 3.4 Retail payment systems .................................................................................... 183 3.4.1 Card-based systems ................................................................................ 183 3.4.2 Cheque clearing system........................................................................... 184 3.4.3 Electronic Clearing Service (ECS) ........................................................... 185 3.4.4 Electronic Funds Transfer system............................................................ 186 3.4.5 Ongoing and future projects..................................................................... 186 4. Systems for post-trade processing clearing and securities settlement....................... 187 4.1 General overview .............................................................................................. 187 4.2 Post-trade processing systems ......................................................................... 189 4.2.1 Government securities ............................................................................. 189 4.2.2 Collateralised Borrowing and Lending Obligation (CBLO) ....................... 189 4.2.3 Interest rate swaps................................................................................... 190 4.2.4 Exchange-traded securities and derivatives ............................................ 190 4.3 Central counterparties and clearing systems .................................................... 193

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4.3.1 Government securities ..............................................................................193 4.3.2 Collateralised Borrowing and Lending Obligations (CBLO) ......................194 4.3.3 Foreign exchange settlement....................................................................196 4.3.4 National Securities Clearing Corporation Ltd. (NSCCL)

and Indian Clearing Corporation Limited (ICCL).......................................196 4.3.5 Bombay Stock Exchange..........................................................................200 4.4 Securities settlement systems............................................................................202 4.4.1 Government securities ..............................................................................202 4.4.2 Securities traded on the NSE and the BSE ..............................................202 4.4.3 Derivatives ................................................................................................203 4.5 Use of securities infrastructure by the Central Bank ..........................................203

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ATM BOISL BSE CBLO CCIL CCP CDSL CFMS CRR CSGL ECS EFT FEDAI ICSE IDL IDRBT IFTP INFINET INR IPO IVR LAF MICR NDC NDS/SSS NEAT NECS NFS NDS-OM

NPC NSCCL NSDL NSE OECLOB OTC

India

List of abbreviations

automated teller machine Bank of India Shareholding Ltd Bombay Stock Exchange collateralised borrowing and lending obligation Clearing Corporation of India Limited central counterparty Central Depository Services Ltd Centralised Funds Management System cash reserve ratio constituent subsidiary general ledger Electronic Clearing Service Electronic Funds Transfer Foreign Exchange Dealers Association of India Inter-Connected Stock Exchange intraday liquidity Institute for Development and Research in Banking Technology interbank funds transfer processor Indian Financial Network Indian rupees initial public offer interactive voice response liquidity adjustment facility magnetic ink character recognition net debit cap Negotiated Dealing System/Securities Settlement System National Exchange for Automated Trading National Electronic Clearing Service National Financial Switch Negotiated Dealing System ? Order-Matching (RBI-NDS-GILTS-Order Matching Segment) National Payments Council National Securities Clearing Corporation of India Ltd National Securities Depository Limited National Stock Exchange open electronic consolidated limit order book over-the-counter

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OTCEI PFRDA PI RBI RTGS SCRA SEBI SGF SGL SLR SSS

Over The Counter Exchange of India Pension Fund Regulatory Development Authority of India participant interface Reserve Bank of India real-time gross settlement Securities Contracts (Regulation) Act, 1956 Securities and Exchange Board of India settlement guarantee fund subsidiary general ledger statutory liquidity ratio securities settlement system

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