RBI raps banks for ignoring new technology

Wednesday, 21 March 2007, 05:00 Hrs
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Bangalore: The Reserve Bank of India (RBI) rapped the public sector banks for not making optimum use of the Real Time Gross Settlement (RTGS) and the National Electronic Fund Transfer (NEFT) systems to help customers and increase business. "The biggest challenge faced by the banking system is the effective payment and settlement system. A viable and robust payment and settlement system is the strength of banking system in the country," RBI deputy governor V. Leeladhar said after inaugurating 125 new ATM (automatic teller machines) set up by Canara Bank here. Lamenting that the state-owned banks were not implementing the technology measures initiated by the regulator (RBI), he said while Indian IT firms were helping the whole world by providing banking software to move from cash payment to electronic payment, the public sector banks were not taking advantage of the same technology. "There is an urgent need to leapfrog in making use of the technology. I regret to inform the banks have failed to explain to their customers the benefits of using the RTGS for payments unlike foreign banks operating in the country. As a result, customers of Indian banks are not fully aware of the advantages of the system," Leeladhar pointed out. The RBI had invested 1.5 billion in setting up the RTGS facility for use by the banks free of cost to help transfer of funds electronically in just two hours in place of the traditional system that takes about 15 days. The system helps banks to electronically transfer funds up to 1,000 billion every day. "Though the RTGS system can execute about 100,000 transactions a day, banks are currently doing only 15,000 transactions per day, of which 13,000 are inter-bank transactions. Transactions through NEFT are about 18,000 per day," Leeladhar said. The RTGS system is operating in about 28,000 branches located in 3,200 cities and towns across the country. Calling for a change in the mindset to make best use of the technology and help customers to use the facility, Leeladhar said the banks should stop worrying about losing 'float money' in implementing the RTGS and provide the benefit to customers. The float is the time lapse between the issue of a bank draft and its encashment by the beneficiary. The deputy governor said the RBI was hopeful of implementing the cheque truncation system in six public sector banks from next month. A pilot project is underway in the national capital region (NCR) to test the system wherein a transparent cheque is transferred electronically and the issuing bank verifies its amount in five minutes. "The truncation system will ensure cheques are not lost or misplaced in transit by post or courier. The transaction time is also reduced to minutes as against the current practice, which takes more than a fortnight to realize the outstation cheque payment," he added.
Source: IANS
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