Saturday, 24 September 2016

Electronic Payment Systems in India

In early 90s, it was decided by the RBI that a system needed to be put in place that would (i) decrease the volumes of paper instruments in MICR clearing and (ii) improve customer service by ensuring prompt and secure interest/dividend payments to the beneficiaries. Such a system needed to be cost-effective and serve as an alternate method of effecting bulk, low value, recurring payment transactions, thereby obviating the need to issue and handle paper instruments. Electronic Clearing Service (ECS) Credit scheme provided the answer to these problems.
In ECS Credit a series of electronic payment instructions are generated to replace paper instruments. The system works on the basis of one single debit transaction triggering a large number of credit entries. These credits or electronic payment instructions which possess details of the beneficiary's account number, amount and bank branch, are then communicated to the bank branches through their respective service branches for crediting the accounts of the beneficiaries either through magnetic media duly encrypted or through hard copy.
User institutions, usually corporate bodies/government departments which have to effect payments to large number of beneficiaries submit details of payments in magnetic media to the bank managing the clearing house, through a Sponsor Bank. The user institutions are required to obtain mandates from beneficiaries, for crediting their accounts under ECS. The corporate bodies too should on their own, advice the beneficiaries about the due date of credit under ECS.
The minimum number of transactions per user institution is 2,500, with upper limit in value of any single item being restricted to Rs.1,00,000/-. A very low service charge has been prescribed under the scheme to promote ECS.
Electronic Clearing Service - Debit, is a scheme which facilitates payment of charges to utility services such as electricity, telephone companies, payment of insurance premia and loan instalments etc. by customers. The scheme has been introduced at Chennai and Mumbai for collection of telephone bills by Madras Telephones and MTNL, Mumbai respectively in 1996. In 1997, Calcutta Telephones also joined the ECS Debit scheme.
ECS Debit envisages a large number of debits resulting in a single credit simultaneously. ECS Debit works on the principle of pre-authorised debit system under which the account holders' account is debited on the appointed date and the amounts are passed on to the utility companies. The scheme thus facilitates:
  • faster collection of bills by companies;
  • better cash flow management; and
  • eliminates the need to go to collection centres/designated banks by the customers.

 RAPID (Receipt and Payment Instruments/Documents) is a post verification debit scheme. The consumer verifies the bill and has the option to pay the bill either in cash or can authorise the bank branch to debit his account. In this scheme the utility company prepares its bills in three parts. The first part serves as a receipt to the customer, the second serves as a voucher for the collecting branch and the third part which contains a MICR band is sent to the service branch. The first part of the receipt is returned to the customer by the collecting branch duly affixing the paid stamp.

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