ABSTRACT

The payment and settlement system constitutes the backbone of the financial sector .It facilitate the movement of money in the economy. In payment and settlement system a study is made on components of payment system which includes both retail and large value systems. In retail it is both paper based and electronic based instrument. The features and process of Cheque, Cheque truncation system, credit card, ECS, NFET, and RTGS are explained. The efficient functioning of the payment system makes a key contribution to overall economic performance by allowing safe and timely completion of financial transactions. Recognizing the importance of payments systems to the development the economy, Reserve Bank of India, has taken number of steps during the last few years to build a robust payments system. Then the five year annual payment report of BNP are compared and visualize the growth of electronic payment in India. From the analysis, to suggest the initiatives for the adoption of new payment modes.

In International Trade a study is made on methods of payment (letters of credit, documentary collections, cash in advance), methods of funds remittance (checks, bankers draft, SWIFT transfer), different types of letters of credit that are available to use for international business transactions (confirmed/ unconfirmed, transferable, standby), the risks and opportunities for each type of letter of credit. types of payment (sight, deferred, commercial invoices, transport documents and documents relating to services), documentation and requirements (e.g., commercial invoices, transport documents and documents relating to services). To find Changes in International Trade Practices.

1. Introduction
Payment Systems are the key component of any financial system. They facilitate the movement of money in the economy. The efficient functioning of the payment system makes a key contribution to overall economic performance by allowing safe and timely completion of financial transactions. Payment Systems also provides the conduit for effective transmission of monetary policy. World over, the payment systems segment of the financial system have been witnessing rapid changes due to the developments in Information and communication technologies. Recognizing the importance of payments systems to the development the economy, Reserve Bank of India, has taken number of steps during the last few years to build a robust payments system. The steps taken include building the necessary payments infrastructure and develop a strong institutional framework for the payment and settlement systems in the country. Developments in payment systems for increasing its efficiency are a continuous process. In the context of progressive integration of financial markets, both domestically and cross border, and the fast-paced changes in technology and institutional infrastructure, there is a need for annual review of payment and settlement systems. The parameters of the reviews would be based on the timelines of customer service, cost of operation, service charges and overall impact on the financial system. This project covers the developments in retail and large payment systems during the last few years.

Objective
1. To make a study in various Indian payment system like MICR, ECS / NECS, NEFT and RTGS. 2. To analyze and compare the FIVE year annual payment report of BNP and to visualize the growth of electronic payment in India. 3. From the analysis, to suggest the initiatives for the adoption of new payment modes. 4. To ensure that all the payment and settlement systems operating in the country are safe, secure, sound, efficient, accessible and authorized. 5. To learn the future trends in payment and settlement systems. 6. To learn the most appropriate methods and terms of payment and required documentation to ensure timely payment for the sale of goods and/or services.

COMPONENT OF INDIAN PAYMENT SYSTEM:

Retail Systems

Large Value Systems

Paper-based

Electronic

Electronic

MICR

CTS

ECS

NEFT

CARD

RTGS

COMPONENT OF INDIAN PAYMENT SYSTEM

Retail Payment Systems Retail payments are transactions which can typically be classified as, (i) Person to Person, (ii) Person to Business - (eg. bill payments), (iii) Currency withdrawals( ATM/debit cards) and (iv) Advances (credit cards). These payments generally refer to obligations arising from retail commercial and financial transactions which can be either one-time person to person (or business) payments or recurring bill payments (or domestic remittances from person to persons) or payments to Governments. These transactions need not be of small value alone, but are generally of low average transaction value but high transaction volumes. They also involve a much broader range of payment instruments and transaction systems. The instruments used to effect these payments differ based on the requirements. They can be currency, paper based instruments like Cheque and demand drafts, electronic message based systems, cards based systems and off-late Short Messaging System of mobile phone. These instruments (excluding currency) along with the systems and procedures of clearing and settlement arrangements for these instruments constitute the retail payment systems. Consumers generally use retail payments in one of the following ways: Purchase of Goods and ServicesPayment at the time the goods or services are purchased. It includes attended (i.e., traditional retailers), unattended (e.g., vending machines), and remote purchases (e.g., Internet and telephone purchases). A variety of payment instruments may be used, including cash, check, credit, or debit cards. Bill PaymentPayment for previously acquired or contracted goods and services. Payment may be recurring or nonrecurring. Recurring bill payments include items such as utility, telephone, and mortgage/rent bills. Nonrecurring bills include items such as medical bills.

 P2P PaymentsPayments from one consumer to another. The vast majority of consumer-to-consumer payments are conducted with checks and cash, with some transactions conducted using electronic P2P payment systems. Cash Withdrawals and AdvancesUse of retail payment instruments to obtain cash from merchants or automated teller machines (ATMs). For example, consumers can use a credit card to obtain a cash advance through an ATM or an ATM card to withdraw cash from an existing demand deposit or transaction account. Consumers can also use personal identification number (PIN)-based debit cards to withdraw cash at an ATM or receive cash-back at some point-of-sale (POS) locations. The most popular means of retail payment instrument is, the Currency which is the legal tender. The main advantage of currency vis-vis other payments instrument is its universal acceptance, immediate final settlement and relatively lowest cost to the payee for upfront payment (cost would be involved when the payment has to made at a particular location). The major disadvantage of currency is carrying of large quantities of currency to make payments would involve transportation issues and is also a security risk. Further, holding large quantities of currency does not fetch any return - the interest foregone because of currency holding is a cost to the holder of currency. While currency as a payment instrument would have no perceptible cost to the payer, the processing of this instrument involves a cost to the society. Next to currency the other paper based payment instruments viz. cheques have been a Common mode of payment instrument for the business. The general public prefers this mode mainly for payment of utility bills etc. The developments in technology resulted in numerous innovations in the payment system area. These innovations resulted in systems which are more efficient in terms of the time and effort needed to process payment instructions. The innovations started with processing of payment instructions stored in electronic formats in their storage media's, which were manually transported to processing centers (clearing houses) which further graduated to the transmission of electronic messages insecure formats through secured communication channels. These innovations have resulted in the payment instruments like electronic funds transfer systems and card based systems; the latest innovation being mobile phone based payment systems.

Retail payment instruments Cheque: The Negotiable Instruments Act, 1881 defines a cheque as a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. A Cheque is a document (usually a piece of paper) that orders a payment of money. The person writing the cheque, the drawer, usually has a chequing account where their money is deposited. The drawer writes the various details including the money amount, date, and a payee on the cheque, and endorse it, ordering their bank, known as the drawee, to pay this person or company the amount of money stated.Cheques as payment instrument is most popular mode of payment in the country.

Specimen of a Cheque

Parts of a cheque

Drawer, the person or entity who makes the cheqe Payee, the recipient of the money Drawee, the bank or other financial institution where the cheque can be presented for payment Amount, the currency amount

Features of a cheque i. ii. iii. iv. v. vi. A Cheque must be in writing and endorsed. It contains an unconditional order. It is issued on a specified banker only. The amount specified is always certain and must be clearly mentioned both in figures and words. The payee is always certain. It is always payable on demand.

vii. The cheque must bear a date otherwise it is invalid and shall not be honored by the bank. Types of Cheque a) b) c) d) Open cheque Crossed cheque. Bearer cheque Order cheque

Open cheque: An open cheque is a cheque which is payable at the counter of the drawee bank on presentation of the cheque. Crossed cheque: A crossed cheque is a cheque which is payable only through a collecting banker and not directly at the counter of the bank. Crossing ensures security to the holder of the cheque as only the collecting banker credits the proceeds to the account of the payee of the cheque. When two parallel transverse lines, with or without any words, are drawn generally, on the left hand top corner of the cheque. A crossed cheque does not effect the negotiability of the instrument. It can be negotiated the same way as any other negotiable instrument. Types of Crossing There are two types of negotiable instruments: General Crossing Special Crossing Cheque crossed generally Where a cheque bears across its face an addition of the words and company or any abbreviation thereof, between two parallel transverse lines, or of two parallel transverse lines simply, either with or without the words not negotiable, that addition shall be deemed a crossing, and the cheque shall be deemed to be crossed generally. Receive its payment over the counter at the bank. Deposit the Cheque in his own account Pass it to some one else by signing on the back of a cheque.

Cheque crossed specially Where a cheque bears across its face an addition of the name of a banker, either with or without the words not negotiable, that addition shall be deemed a crossing, and the cheque shall be deemed to be crossed specially, and to be crossed to that banker. Account Payee or Restrictive Crossing Not Negotiable Crossing

Account Payee or Restrictive Crossing This crossing can be made in both general and special crossing by adding the words Account Payee. In this type of crossing the collecting banker is supposed to credit the amount of the cheque to the account of the payee only. The cheque remains transferable but the liability of the collecting banker is enhanced in case he credits the proceeds of the cheque so crossed to any person other than the payee and the indorsement in favour of the last payee is proved forged.The collecting banker must act like a blood hound and make proper enquiries as to the title of the last indorsee from the original payee named in the cheque before collecting an 'Account Payee' cheque in his account. Not Negotiable Crossing The words 'Not Negotiable' can be added to General as well as Special crossing and a crossing with these words is known as Not Negotiable crossing.The effect of such a crossing is that it removes the most important characteristic of a negotiable instrument i.e. the transferee of such a crossed cheque cannot get a better title than that of the transferor ( cannot become a holder in due course ) and cannot covey a better title to his own transferee, though the instrument remains transferable.

Bearer cheque: A cheque which is payable to any person who presents it for payment at the bank counter is called Bearer cheque. A bearer cheque can be transferred by mere delivery and requires no endorsement. Order cheque: An order cheque is one which is payable to a particular person. In such a cheque the word bearer may be cut out or cancelled and the word order may be written. The payee can transfer an order cheque to someone else by signing his or her name on the back of it. cheques may not be valid if it is Ante-dated cheques: - cheques which have been written by the maker, and dated at some point in the past. For example, a cheque

issued on 20th May 2003 may bear a date 5th May 2003. Stale Cheque: - cheque is typically valid for six months after the date of issue, after which it is a stale-dated cheque. Mutilated Cheque: - In case a cheque is torn into two or more pieces and presented for payment, such a cheque is called a

mutilated cheque. The bank will not make payment against such a cheque without getting confirmation of the drawer. But if a cheque is torn at the corners and no material fact is erased or cancelled, the bank may make payment against such a cheque. Post-dated Cheque: cheque which has been written by the drawer for a date in the future. For example, if a cheque presented on

8th May 2003 bears a date of 25th May 2003, it is a post-dated cheque. The bank will make payment only on or after 25th May 2003. MICR Cheque: MICR stands for Magnetic Ink Character Recognition used primarily by the banking industry to facilitate the processing of cheques. In MICR technology the information is printed on the instrument with a special type of ink which is made up of magnetic material. On insertion of the instrument in the machine, the printed information is read by the machine. MICR system is beneficial as it minimizes chances of error, clearing of cheques becomes easy and transfer of funds becomes faster in order to facilitate operations. This process involving the following steps: a. b. i. ii. iii. iv. v. account c. d. Selections and acquisition of different types of equipments, necessary in the clearing-house and banks for implementing the MICR The magnetized portion when put under MICR equipment allows instant readability and identification. technology. Standardization of encoding information at the bottom. Encoding in magnetic ink specific details on the cheque itself, to facilitate mechanical sorting. The code line contains the following First six numbers indicate cheque number Next three numbers indicate city code Next three numbers indicate bank code Next three numbers indicate branch code After some space there is number for transaction code i.e. whether the transaction relates to a saving or a current

information :

Transaction Code No. 01 to 09

Nature of transaction represented by the code

Definitions

Codes reserved for clearing house control documents representing debit instruments Savings Bank Account Cheque Current Account cheque A cheque issued by a bank on itself used for making own payments. Also issued in lieu of demand drafts on the same city. Cheques issued to a running loan account

10 11

12 13 14 15 16 17 18 19 20 21 22 23 24

Banker's cheque Cash credit account cheque Dividend warrant Travelers cheque Demand Draft Cheques which will be issued in lieu of existing payment order Gift cheque Interest warrant State government transactions Central Government transactions Railway transactions Posts & Telegraphs transactions Defense transactions

A prepaid instrument issued by a bank on to itself, similar to banker's cheque issued in lieu of a draft on the same city.

25 26 27 28 29 30 31 40 32 to 48 49

Telecommunication transactions Reserved Departmentalized ministries (UMALO) transactions Refund warrant At Par Current Account Cheques At par Cash Credit Account Cheques Savings Bank at par cheque Credit transactions to NRE Accounts in Indian Rupees Reserved Income Tax Refund Orders Income Tax Refund Orders payable at banks other than Reserve Bank of India. Multi-city cheques pertaining to Current account Multi-city Cash Credit Account instruments payable at all branches of the bank Savings Bank Account cheques payable at all branches of the bank i.e multi-city cheques Credit transactions to Non- Resident External Accounts maintained by NonResident Indians

Process flow:

B receives cheque, deposits in Y bank. Where he Maintain account

A draws cheque on X bank to B.

Y bank sends the cheque to X bank for realization

X bank honor cheque on receipt. Pays to Y bank

Clearing and settlement of cheques Local Cheques: All cheques and other Negotiable Instruments payable locally would be presented through the clearing system prevailing at the centre. Cheques deposited at branch counters and in collection boxes within the branch premises before the specified cut-off time will be presented for clearing on the following day. Bank would give credit to the customer account on the same day of clearing settlement. Withdrawal of amounts so credited would be permitted after reckoning the cheque return schedule of the clearing house. Bank branches situated at centres where no clearing house exists, would present local cheques on drawee banks across the counter and proceeds would be credited, at the earliest, on realisation Outstation Cheques:

Maximum timeframe for collection of Cheque drawn on state capitals/major cities/other locations are 7/10/14 days respectively. If there is any delay in collection beyond this period, bank are entitled to pay interest at the rate specified in the Cheque Collection Policy of the bank. In case the rate is not specified in the Cheque Collection Policy, they are entitled to receive interest rate on Fixed Deposits for the corresponding maturity. Banks' Cheque collection policy also indicates the limit up to which outstation cheques are given immediate credit. Working days shall not include Bank Holidays and days when clearing house in not operational. The clearing and settlement of cheques drawn on different banks require the coming together of the banks in that area for transfer of instruments and the final settlement of funds. This process is facilitated by the clearing houses at these centers. Currently, 1064 clearing houses are operational in the country. Of these, at 59 centers the clearing and settlement process has been mechanized by the introduction of Magnetic Ink Character Recognition (MICR) based sorter machines. Eighty percent of the total cheque clearing volume and value in the country are accounted for by these centers. To further bring in efficiency and automating the settlement obligation Magnetic Media Based Clearing System (MMBCS) is being implemented at centers with more than 15 bank branches, where, currently the process is being carried out manually. At the remaining centers where the volumes of cheques are low, manual clearing continues. The clearing and settlement cycle in the country is two days one Day-1 the cheques are presented at the clearing house and Day-2 the funds settlement and return clearing are accounted for.

Electronic Retail Payment Instruments:

Cheque Truncation System (CTS): Cheque truncation is the conversion of physical cheque into electronic form for transmission to the paying bank. Cheque truncation eliminates cumbersome physical presentation of the cheque and saves time and processing costs. The process of removing the paper check from its processing flow is called truncation. In truncation, both sides of the paper check are scanned to produce digital images. The checks are sorted by machine according to the routing/transit (RT) number as presented by the magnetic ink character recognition (MICR) line, and scanned to produce a digital image. A batch file is generated and sent to the Reserve Bank for settlement or image replacement. If a substitute check is needed, the transmitting bank is responsible for the cost of generating and transporting it from the presentment point to the Reserve Bank or other corresponding bank. The electronic Information can be exchanged with other banks for clearing purpose. Legal recognition : By amending Sec 6 of NI Act, the physical image of a truncated cheque and electronic cheques, have been recognized equal to a paper cheque. Method for truncation: The truncation can be done by using image processing. Imparting uniqueness of the cheque to the image: Image carries digital signature, and physical endorsement of the presenting bank, in a prescribed manner.

Process flow

Step-1: The presenting bank captures the data & images of the cheques using their Capture System. Step-2: The captured images and data are sent to the central clearing house (CH) for transmission to the payee/ Drawee banks. For that, RBI provides to the banks, the Clearing House Interface (CHI) software. It enables the banks to connect and transmit data in a secure way and with non-repudiation, to the Clearing House (CH). Step-3: CH processes the data and arrives at the settlement figure for the banks and sends the required data to payee/drawee banks for processing at their end. Step-4: The drawee/payee banks use the same CHI for receiving the data and images from CH. The drawee bank Capture System processes the inward data and images and generates the return file for unpaid instruments. Criteria to participate in CTS: The criteria for banks participating in CTS are: i. Membership of the clearing house. ii. Membership of the Indian Financial Network (INFINET) Infrastructure requirement: The infrastructure required for CTS from bank's end are, (a) connectivity from the bank gateway to the clearing house, (b) hardware and software for the CTS applications. RBI provides CHI and the banks have to procure other hardware and system software for the CHI and the application software for their capture systems on their own. Image specifications in the CTS: The electronic images of truncated cheques is in gray scale technology. There are 3 images of the cheques i.e. front grey, front black & white and back black & white. The image specifications are:

Image Type: Minimum DPI Format Compression Front Grayscale: 100 DPI JFIF JPEG Front Black & White: 200 DPI TIFF CCITT G4 Reverse Black & White: 200 DPI TIFF CCITT G4 The image quality of the Grey Scale image shall be 8 bits/pixel (256 levels). Security of the image and data: The security, integrity, non-repudiation and authenticity is ensured using the Public Key Infrastructure (PKI). The CTS is compliant to the requirement of the IT Act, 2000. The PKI standards used are in accordance with the appropriate Indian Acts and practices of IDRBT which is the certifying authority for banks & FIs in India. Image Replace Document (IRD) Under CTS, after the capture of the image, the physical cheque would be warehoused with the presenting bank. In case any connected persons require the instrument, the payee bank would issue a copy of the image, under its authentication, which is called the Image Replacement document (IRD). It is a legally recognized replacement of the original cheque for re-presentment. The provisions of NI act (Section 81(3) of the NI Act as amended) also permit the usage of such IRD.

Important characteristics of cheque truncation

1) Truncated is possible when the cheque enters the banking system. 2) Truncation can be done only in the clearing process, to reduce the time delay. It can be done by the banks involved or clearing house. The drawer or holder cannot truncate a cheque. 3) The paper cheque will be replaced by the electronic image in the process of truncation. 4) The paper cheque shall be preserved by the collecting bank or the clearing house, after truncation. 5) Truncation is a more secure system than the current exchange of physical documents in which the cheque moves from one point to another. Net cheque Net cheque is mode of online payment where in the money is deposited from one account to another. Net cheque dismisses the need of the physical cheques and the money is transferred via the electronic medium. The mechanism of this mode of online payment is simple. There is a regulatory authority that registers the users who want to transfer money via net cheque. If want to transfer money via online payment, the requirement is that both the involved parties are registered. There are many network protocols which offer the e commerce services of online payment. It is necessary that both the involved parties have an online account that is associated with a bank which is recognized by that payment gateway. In this mode of online payment, when the net cheque is deposited, the corresponding amount is debited from the givers account and the same amount is credited in the receivers account. In return, the payment gateway used in the online payment charges some commission for providing the services. The rates depend on the amount being exchanged.

There is a net cheque server which keeps all the information about the registered users. It is the duty of the servers to authenticate the users when they are initiating the online payment. The servers store all the relevant information of the users. This information includes a Unique id of the user His personal details Bank account details The digital signature and other details.

The digital signature is a form of an electronic signature. Each registered user who uses online payment has a unique signature. When the sender sends a net cheque to the receiver, he appends his digital signature on the cheque. This signature authenticates the sender of the net cheque. The receiver can verify the digital signature to make sure that sender of net cheque is valid and that the message is not tampered on its way. Online payment using net cheques provides scalability and reliability. The servers used by the net cheques are more than one. So even if one of the servers is out of order, you can rely on the other servers. It also provides efficiency since you can be rest assured that the net cheque system will never fail. The digital signature mechanism is implemented using the Kerberos. This ensures security. The advantages offered by net cheque online payment are many. It is time saving. When cheque is deposited in conventional manner, it takes at least a day for the money to get credited. In this mode of online payment, money is credited almost instantly.

Electronic Clearing Service (ECS): The Reserve Bank of India has introduced the Electronic Clearing Service (Debit) Scheme to provide faster method of effecting periodic and repetitive payment by direct debit to customers accounts (duly authorized) thereby minimizing paper transactions and increasing customers satisfaction .Electronic Clearing Service (Credit) Scheme to provide institutions having to make large number of payments (such as Interest/Dividends) can directly deposit the amount into the bank accounts of the share-holders/ depositors/ investors . ECS is a retail payment system which facilitates bulk payments, that facilitate payments from one-to-many and receipts that are from many-to-one. The two components of this system are ECS (credit) and ECS (Debit). This facility is now available at 67 major. ECS-Credit System In this method of payment whereby the institutions having to make a large number of payments (such as interest / dividend) can directly deposit the amount into the bank accounts of the share-holders/ depositors/ investors without having to issue paper instruments. The ECS user's bank is called as the sponsor bank and the ECS beneficiary account holder is called the destination account holder or beneficiary and his bank is called the destination bank. Working of ECS Credit system: Step 1: The corporate body institution (called User) which has to make payments to a large number of customers/investors would prepare the payment data on a magnetic media (i.e., tape or floppy) and submit the same to its banker (Sponsor Bank).

Step 2: The Sponsor Bank would present the payment data to the local Bankers Clearing House authorizing the Manager of the Clearing House to debit the Sponsor Banks account and credit the accounts (Destination Bank) of the banks where the beneficiaries of the transactions maintain their accounts.

Step 3: On receiving this authorization, the Clearing House will process the data and work out an inter-bank funds settlement. Step 4: The Clearing House will furnish to the service branches of the destination banks branch-wise credit reports indicating the beneficiary details such as the names of the branches, where the accounts are maintained, the names of the beneficiaries, account type, account numbers and the respective amounts.

Step 5: The service branches will in turn pass on the advices to the concerned branches of their bank, which will credit the beneficiarys accounts on the appointed date.

Benefits under ECS (Credit)

Payment on the due date. Effortless receipt No need for visiting the bank for depositing the dividend/interest warrant. Loss of instrument in transit or fraudulent encashment thereof and consequent correspondence with the company are totally eliminated.

ECS debit system The Reserve Bank of India has introduced the Electronic Clearing Service (Debit) scheme to provide faster method of effecting periodic and repetitive payments by direct debit to customers accounts (duly authorised) thereby minimising paper transactions and increasing customer satisfaction. Electronic Clearing Service (Debit) envisage a large number of debits and one credit in the case of collection of electricity bills, telephone bills, loan installments, insurance premia, Club fees, etc by the Utility Service Providers.

As per the existing system for collection of electricity bills and telephone bills, the customers/subscribers are required to go to the collection centres /designated banks and stand in long queues for payment of bills/dues. There would not be any cash transaction or payment through cheques in the new system. There is an overall limit of Rs.5, 00,000 per transaction. A sum of Rs.0.50 p. only is collected by NCC, RBI towards Clearing House charges. Utility service providers like MTNL, Telephone/Mobile companies, Telecom Departments, State Electricity Boards, Banks (for collection of credit cards dues) LIC, Housing Finance Companies, Intermediaries and Clubs etc are making use of ECS(Debit) Clearing system.

Working of ECS Debit system:

Utility Companies, banks/institutions receiving periodic/repetitive payments towards electricity bills/telephone bills/loan installments/insurance premia initially collect mandates from their customers / subscribers for collection of amounts due from them by direct debit to their accounts with banks. The mandate provides details such as the name, account number, name of bank/branch etc. duly certified by the bank concerned.

Based on the details furnished in the mandates, the user company prepares transaction data on electronic media and submits the encrypted data to the local Clearing House, through its Sponsor bank. After due validation of the data, the local clearing house processes the same and arrives at the inter-bank settlement as also generates bank-wise/branch-wise reports(hard copies) NCC debits the destination banks accounts with clearing house and simultaneously affords a consolidated credit to the sponsor banks account and furnishes the bank-wise and branch-wise reports to the service branches of destination banks.

Service branches forward the branch-wise reports to the respective branches for debiting the accounts of customers with the indicated amounts.

Benefits under ECS (Debit)

Faster Collection of bills by the companies and better cash management by them. Eliminates the need to go to the collection centres/banks by the customers and no need to stand in long Qs for payment Automatic debiting to the accounts once the mandates are given by the customers, to that effect cuts down the procedural delay.

Credit and Debit cards

Credit and Debit cards have been in use in the country for many years now. However the card base as well as the usage has picked up only during the last five years. Nearly 2 million cards are added each month and the card base as at the closed of March 2007 was 98 millions. Nearly all the cards have been issued by bank in affiliation with card issuing companies such as Visa, Master Card and American Express. Many banks converted their ATM cards to debit cards to take advantage of the switching and clearing and settlement facilities offered by Visa and Master Card. Smart Cards are relatively new and only a handful of banks have issued such cards numbering around 3 lakh cards with outstanding value of Rs.1000 crores. Credit and Debit cards have been in use in the country for many years now. As at the end of May 2007, banks have issued 24.13 million credit cards and 78.46 million debit cards. The growth in the card based payment systems is being closely monitored. However no conclusive inference could be drawn on the impact of the charges being levied by banks as also the announcement in the Central Government Budget on the levying of service tax for the transactions through the cards.

1. Customer pays by credit card 6. Principal bank sends transaction back to merchant
ENTIRE PROCESS TAKES 5-15 SECONDS

2. Merchant process credit card using the software provided

5. Isuing bank approves/declines transaction back to principal bank

at ank th The b the issued ard to c credit er custom

3. Ectronically submitted to principal bank

The bank that undertake

mermerch ant account

4. Principal bank sends request to issuing bank

Credit card Processing

National Electronic Funds Transfer (NEFT): National Electronic Funds Transfer (NEFT) is a nation-wide system that facilitates individuals, firms and corporate to electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch in the country.It is an online system for transferring funds. This facility is used mainly to transfer funds below Rs. 2,00,000. The Reserve Bank of India has instructed banks that they should not use NEFT for amounts above Rs 2 lakh (200 thousand). The new rule came into effect on 15 November 2010. For small transactions, National Electronic Fund Transfer (NEFT) which provided T+0 and T+1 settlement system (depending on the time a customer gives instruction to the bank for transferring the fund). Process flow: Step-1: An individual / firm / corporate intending to originate transfer of funds through NEFT has to provide details 1. Amount to be remitted 2. Account number which is to be debited 3. Name of the beneficiary bank 4. Name of the beneficiary customer 5. Account number of the beneficiary customer 6. Sender to receiver information, if any 7. The IFSC(Indian Financial Service Code) number of the receiving branch

IFSC: Indian Financial System Code (IFSC) is used in NEFT transactions. It is an alpha numeric code designed to uniquely identify the bank-branches in India. It is an 11 digit code with first 4 characters representing the banks code, the next character reserved as control character (Presently 0 appears in the fifth position) and remaining 6 characters to identify the branch. Step-2: The service bank branch prepares a message and sends the message to its pooling centre (also called the NEFT Service Centre). Step-3: The pooling centre forwards the message to the NEFT Clearing Centre (operated by National Clearing Cell, Reserve Bank of India, Mumbai) to be included for the next available batch. Step-4: The Clearing Centre sorts the funds transfer transactions destination bank-wise and prepares accounting entries to receive funds from (debit) the service banks and give the funds to (credit) the beneficiary banks. Thereafter, bank-wise remittance messages are forwarded to the beneficiary banks through their pooling centre (NEFT Service Centre). Step-5: The beneficiary banks receive the inward remittance messages from the Clearing Centre and pass on the credit to the beneficiary accounts. Data Entry at the Sending Bank Branch The sending bank branch shall prepare the Structured Financial Messaging system (SFMS) message as and when the applications for the funds transfer is received and arrange to send the message to NEFT Service Centre till the cut off time for the batch. Transmission/Submission of NEFT message to the NEFT centre The sending Service Centre shall transmit the NEFT SFMS message to the NEFT Clearing Centre by using the communication network designated by Reserve Bank.

Revocation of Payment Instruction A payment instruction issued for execution shall become irrevocable when it is executed by the sending bank. Any revocation, after the payment instruction is executed by the sending bank shall not be binding on any other party in the NEFT system. Acknowledgement by the beneficiary bank and return in case of non-credit No acknowledgements are envisaged under NEFT Scheme. A message which is not returned unaffected before the next settlement day is treated to have been completed and credit afforded to the beneficiary's account by the beneficiary branch. It is, therefore, vital that unaffected credits are re-transmitted back as return NEFT transactions in the immediate next batch itself. Sender to be advised in case of refund If the beneficiary specified in the sender's payment instruction fails to get payment through the NEFT system for some valid reasons, the sender shall be informed immediately after the sending bank gets the returned NEFT. The sending bank shall also arrange to make payment to the sender by crediting the account of the sender or otherwise placing funds at the disposal of the sender. Beneficiary to be advised of the receipt of funds After crediting the account of the beneficiary, the beneficiary bank shall advise the beneficiary of the funds received. The Statement of account/Pass Book entry or any online messaging system shall indicate briefly the source of funds as well. The NEFT system was initially designed to allow destination banks to return transactions on a T+1 basis. The traffic analysis has revealed that a major chunk of returns are effected by banks either in the last batch of the day or in the first batch of the next day, indicating that the transactions are processed by the destination batches only at the end of the day instead of batch-wise. In order to streamline the system and complete the processing cycle on a near-real-time basis, the concept of return within two hours of completion of a batch has been introduced.

The B+2 return discipline would require banks to afford credit to beneficiary accounts immediately upon completion of a batch or else return the transactions within two hours of completion of the batch settlement, if credits are unable to be afforded for any reason. NEFT has eleven batches of settlement from 9am 7pm on week days and five batches of settlement at 9 am-1pm batches of settlement Saturdays. This is a message based funds transfer system. The system provides secure one-to-one funds transfer facility for customers of banks. Unlike its precursors the EFT system which provided settlement facility only at few centers, the NEFT facilitates national coverage, with centralized clearing and settlement facility. Further, to provide sound legal basis to the system, the system is provided with Public Key Infrastructure (PKI) based security system. There are eleven settlements during a day in this system, thereby facilitating same day settlement of funds, for customers using this facility.

RTGS-Real Time Gross Transaction System:

RTGS The acronym 'RTGS' stands for Real Time Gross Settlement. The Reserve Bank of India maintains this payment network. RTGS system is a funds transfer mechanism where transfer of money takes place from one bank to another on a 'real time' and on 'gross' basis. This is the fastest possible money transfer system through the banking channel. Settlement in 'real time' means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed. 'Gross settlement' means the transaction is settled on one to one basis without bunching with any other transaction. The money transfer takes place in the books of the Reserve Bank of India, the payment is taken as final and irrevocable. Both the remitting and receiving must have Core banking in place to enter into RTGS transactions. Core Banking enabled banks and branches have assigned RTGS 11-character alphanumeric codes, which are required for transactions along with recipient's account number.

RTGS is a large value (minimum value of transaction should be Rs. 2, 00,000) funds transfer system whereby financial intermediaries can settle interbank transfers for their own account as well as for their customers. The system effects final settlement of interbank funds transfers on a continuous, transaction-by-transaction basis throughout the processing day. Customers can access the RTGS facility between 9 am to 4:30 pm on week days and 9 am to 12 noon on Saturday.

Banks could use balances maintained under the cash reserve ratio (CRR) instead of the intra-day liquidity (IDL) to be supplied by the central bank for meeting any eventuality arising out of the real time gross settlement (RTGS). The RBI fixed the IDL limit for banks to three times their net owned fund (NOF). The IDL will be charged at Rs 25 per transaction entered into by the bank on the RTGS platform. The marketable securities and treasury bills will have to be placed as collateral with a margin of five per cent. Process of RTGS The remitting customer has to furnish the following information to a bank for affecting a RTGS remittance: 1. Amount to be remitted 2. His account number which is to be debited 3. Name of the beneficiary bank 4. Name of the beneficiary customer 5. Account number of the beneficiary customer 6. Sender to receiver information, if any 7. The IFSC(Indian Financial Service Code) Number of the receiving branch

Step1: Each bank is required to have a single gateway interface called Participant Interface (PI) for RTGS system. The payment / settlement message originates from the participants host system. Step2: This message is passed on by the PI to Inter-bank Funds Transfer Processor (IFTP) acting as broker. Communication between PI and IFTP is through RTGS only. Step3: IFTP stores the message and in case of payment messages, constructs settlement message, containing a core subset of the information required for settlement and routed to the RTGS system at RBI. Step4: After receipt of this subset, RBI (the settlement agent) carries the settlement by debit and credit of the accounts of respective banks and conveys the status to IFTP. Step5: On receipt of this confirmation, IFTP reconstructs the message by adding back other details and sends settlement advice to both the originating and beneficiary participant. The business information is not known to the settlement agent i.e. RBI Payment Queues: The system also provides for facilities to the participants to view their respective transactions held in their payment queues, cancel such transactions and even change their priority. However, participants can only view transactions on their own payment queues. They can not view other participants queues or their own pending incoming payment instructions.
MESSAGE FLOW STRUCTURES

In India, the RTGS has been implemented by RBI. It has decided to use Y shaped structure out of the four messages flow structures (V, Y, L, and T). In this structure the following flow of instructions (it is not actual and is only for understanding the process) takes place:

MESSAGE FLOW STRUCTURES

Y- Message Flow Structure: Each bank is required to have a single gateway interface called Participant Interface (PI) for RTGS system. The payment / settlement message originates from the participants host system. This message is passed on by the PI to Inter-bank Funds Transfer Processor (IFTP)

acting as broker. Communication between PI and IFTP is through RTGS only.IFTP stores the message and in case of payment messages, constructs settlement message, containing a core subset of the information required for settlement and routed to the RTGS system at RBI. After receipt of this subset, RBI (the settlement agent) carries the settlement by debit and credit of the accounts of respective banks and conveys the status to IFTP.On receipt of this confirmation; IFTP reconstructs the message by adding back other details and sends settlement advice to both the originating and beneficiary participant. The business information is not known to the settlement agent i.e. RBI. Under normal circumstances the beneficiary branches are expected to credit the beneficiary's account within two hours of receiving the funds transfer message. If the money cannot be credited for any reason, the receiving bank has to return the money to the remitting bank within 2 hours. Once the money is received back by the remitting bank, the original debit entry in the customer's account is reversed. Payment Queues: The system also provides for facilities to the participants to view their respective transactions held in their payment queues, cancel such transactions and even change their priority. However, participants can only view transactions on their own payment queues. They can not view other participants queues or their own pending incoming payment instructions. Participants Dedicated Settlement Account for RTGS Transactions: A single dedicated account, the RTGS Settlement Account for each participant for outward and inward RTGS payments, is provided by the solution, enabling easy monitoring, tracking and reconciliation of the transactions as well as more efficient liquidity management. Each participant of the RTGS system will be required to open a dedicated settlement account for putting through its RTGS transactions. This account will be an intra-day account in the sense that it would be operational only during the duration of the RTGS day. The account would be funded at the start of the day (SOD) from a current account, the participant holds under the present dispensation at

DAD, Mumbai. Balances in the RTGS Settlement account at the End of Day (EOD) of the RTGS day are swept back to the Participants current account and thereby zeroing the RTGS settlement account. The system enables the participants to place standing instructions with DAD, Mumbai to fund their RTGS settlement account each morning. They can specify an actual amount or percentage of balance to be transferred to the RTGS settlement account every day at SOD. Participants can also specify a minimum threshold value, which must be maintained in their current account while funding their RTGS settlement account. The system also provides a facility to fund the RTGS settlement account during the day from the participants current accounts by the use of Own Account Transfers. FIFO processing/Transaction Priority: Payment transactions emanating from a participants payment Systems gateway are processed by the RTGS system strictly in First-InFirst-Out or FIFO basis. However, to enable the participants to take care of urgent or time critical payments and to enable more effective funds management, the system allows the participants to assign priorities to their payment messages and thereby, enabling a particular transaction to be processed before another transaction, which was submitted earlier to the RTGS system. Within payment messages having the same priority, however, the transactions will be processed on FIFO basis.

Liquidity and Collateral Management: Any RTGS system entails active management of intra-day liquidity by all participants. To ensure smooth settlement of transactions and to avoid bunching of transactions and delay of credit to other participants, it is imperative that participants ensure, at the time of

submission of payment instructions, that there are sufficient funds in their RTGS settlement account to settle their transactions as soon as they are submitted or within a very short interval thereafter. The RTGS system also provides several facilities and tools to aid and supplement the participants liquidity management efforts. The provision of a separate RTGS settlement account, own account transfers, queuing facilities and priority assignment are all examples of such tools. There are two additional powerful intra-day liquidity management utilities, offered by the proposed RTGS system viz. Intra Day Liquidity and Gridlock Resolution Mechanism. Intra Day Liquidity: The RTGS system enables the provision of intra day lines of credit by the Reserve Bank of India to the participants of the RTGS system to enable them to meet their intra day liquidity requirements. Such liquidity will be provided by the RBI at its discretion and under terms and conditions, to be specified by it from time to time. Such intra-day liquidity will be fully collateralized and will be provided to the participants at a charge per transaction. However, failure to repay the credit before the end of the day will invite strict penal action Gridlock Resolution Mechanism: The Grid lock mechanism has the potential to clog the entire system. The solution for this is an optimized gridlock resolution tool. The optimized gridlock resolution tool is to overcome crippling liquidity problem.

ANALYSIS OF FIVE YEAR (2006-2010) ANNUAL PAYMENT AND SETTLEMENT REPORT OF BNP PARIBAS.
NATIONAL ELECTRONIC FUND TRANSFER - 2006 MONTH Total outward debit No Of transaction Jan Feb. Mar April May June July August Sept 965 1200 1325 2456 2365 2143 2456 3654 2456 9685 Nov Dec Total Avg 9654 3698 4663 3504.75 Amount in (cores) 11.02 15.02 20.1 24.02 23.2 25.2 25.4 30.2 26.4 34.2 31.2 20.1 286.06 23.84 Received Inward credit No Of transaction 2136 2365 5632 4562 2563 4562 1123 2365 2455 2145 1254 2145 33307 2775.58 Amount in (cores) 123.2 125.27 200.1 236.2 124.2 214.2 102.2 123.02 102.3 136.2 123.2 235.2 1845.29 153.77 Jan Feb. Mar April May June July August Sept Oct Nov Dec Total Avg REAL TIME GROSS TRANSCATION SYSTEM-2006 MONT H Total outward debit Received Inward credit No Of transaction 998 1002 1024 1336 1201 1235 1123 996 1125 2396 1236 2003 15675 1306.25 Amount in (cores) 123.02 116.58 102.02 123.25 120.4 112.02 125.36 125.2 96.3 100.2 63.2 45.02 1252.57 104.38 No Of transaction 2236 3562 4587 6987 8654 4562 4587 2562 2547 2441 1254 2145 46124 3843.67 Amount in (cores) 125.21 100.2 144.2 99.65 170.4 99.04 98.20 95.64 110.23 112.14 98.36 50.32 1303.59 108.63

NATIONAL ELECTRONIC FUND TRANSFER - 2007 MONTH Total outward debit No Of transaction Jan Feb. Mar April May June July August Sept Oct Nov Dec Total Avg 1002 9564 6542 3654 9996 5463 4789 3654 5632 12919 12365 10728 11730 7192.33 Amount in (cores) 20.3 22.5 50.3 42.3 42.2 29.26 40.2 32.92 34.45 35.1 12.2 36.1 397.83 33.15 Received Inward credit Amount No Of in transaction (cores) 4021 9685 8956 4563 3654 7563 1185 3654 4564 2741 1236 4565 56387 4698.92 203 275 210.2 115.2 236 207 111 112 249 241 301.2 311.03 2571.63 214.30

REAL TIME GROSS TRANSCATION SYSTEM-2007 Received Inward MONTH Total outward debit credit Amount Amount No Of No Of in in transaction transaction (cores) (cores) Jan Feb. Mar April May June July August Sept Oct Nov Dec Total Avg 1235 2456 2569 2456 3654 2456 4463 4280 4864 2365 1254 3265 35317 2943.08 201 180.3 141.01 100.2 120.4 125.2 1002.23 55.01 36.12 56.32 54.32 125.36 2197.47 183.12 5621 6653 9954 8856 10234 3651 9963 12347 24563 36987 64545 81171 274545 22878.75 125.21 100.2 144.2 110.01 170.4 99.04 98.20 111.20 110.23 112.14 115.23 129.00 1425.06 118.76

NATIONAL ELECTRONIC FUND TRANSFER - 2008 MONTH Total outward debit No Of transaction Jan feb Mar April May June July August Sept Oct Nov Dec Total Avg 1110 5536 9825 11213 9960 7234 8307 7799 7756 12919 7856 10728 11838 8353.58 Amount in (cores) 40.01 22.5 50.3 42.3 54.96 29.26 47.15 61 34.45 56.58 39.89 61.04 539.44 44.95 Received Inward credit Amount No Of in transaction (cores) 5002 10254 11466 9963 11553 928 1185 1630 2315 2741 3894 6351 67282 5606.83 203 236.24 244.25 115.2 396.85 207 114.02 143.22 287.63 314.88 391.84 311.03 2965.16 247.10

REAL TIME GROSS TRANSCATION SYSTEM-2008 Received Inward MONTH Total outward debit credit Amount Amount No Of No Of in in transaction transaction (cores) (cores) Jan feb Mar April May June July August Sept Oct Nov Dec Total Avg 5132 5782 5236 4563 5651 3661 4463 4280 4864 5163 5157 5796 59748 4979.00 241 187.09 300.2 115.2 171.54 54.45 54.96 51.36 63.24 68.52 73.49 85.96 1467.01 122.25 8546 1254 10236 10236 129768 2923 5192 14123 31384 48719 64545 81171 408097 34008.08 211 112.1 153.2 119.2 170.4 99.04 98.20 111.20 110.23 112.14 115.23 129.00 1540.94 128.41

NATIONAL ELECTRONIC FUND TRANSFER - 2009 MONTH Total outward debit No Of transaction Jan Feb. Mar April May June July Aug Sep Oct Nov Dec Total Avg 1311 14437 15099 12113 10221 14119 15423 16044 16711 21877 16944 2753 157052 13087.667 Amount in (cores) 63.44 53.16 67.48 54.45 54.96 51.36 63.24 68.52 73.49 85.96 69.52 84.9 790.48 65.873333 Received Inward credit No Of transaction 9026 11313 12453 10611 11553 14066 14489 12953 12726 14826 12954 14930 151900 12658.333 Amount in (cores) 309 368.74 378.11 334.39 396.85 341.11 405.36 501.88 557.81 430.36 558.81 420.36 5002.78 416.8983

REAL TIME GROSS TRANSCATION SYSTEM-2009 MONTH Total outward debit No Of transaction Jan Feb. Mar April May June July Aug Sep Oct Nov Dec Total Avg 6091 5782 6563 5851 5651 6511 7087 5875 5609 6591 5783 6488 73882 6156.833 Amount in (cores) 253 187.09 304.59 258.5 171.54 206.31 177.92 169.55 193.16 159.17 134.63 167.287 2382.747 198.5623 Received Inward credit No Of transaction 99815 107001 125154 124472 129768 111222 122245 126621 124050 133226 145440 140525 1489539 124128.3 Amount in (cores) 246 187.2 316.89 267.56 170.4 215.15 186.16 171.57 184.26 163.81 129.98 147.05 2386.03 198.8358

NATIONAL ELECTRONIC FUND TRANSFER - 2010 MONTH Total outward debit No Of transaction Jan Feb. Mar April May June July Aug Sep Oct Nov Dec Total Avg 20670 25891 25807 28824 26602 28499 29550 34083 27546 37193 36116 39835 360616 30051.333 Amount in (cores) 84.61 86.57 131.11 138.49 141.7 161.06 192.23 272.78 289.4 179.11 254.46 561.04 2492.56 207.71333 Received Inward credit No Of transaction 14202 14945 18025 15671 17046 17932 16077 16380 16492 16492 14930 56147 234339 19528.25 Amount in (cores) 400.88 429.38 443.05 395.15 710.36 552.96 488.81 571.54 505.77 505.77 962.7 353.34 6319.71 526.6425

REAL TIME GROSS TRANSCATION SYSTEM-2010 MONTH Total outward debit No Of transaction Jan Feb. Mar April May June July Aug Sep Oct Nov Dec Total Avg 6065 6192 7403 6276 6664 6910 6987 6734 6384 6514 4598 6666 77393 6449.417 Amount in (mill) 174.63 204.8 189.19 189.31 203.84 173.85 193.18 179.11 170 246.61 174.14 167.287 2265.947 188.8289 Received Inward credit No Of transaction 149292 151205 169950 166584 172028 15680 171355 166874 158473 15247 169156 168091 1673935 139494.6 Amount in (mill) 164.492 159.3 190.35 190.74 187.96 198.12 164.57 175.62 167.96 156.32 246.13 264.53 2266.092 188.841

STATISTICS REPORT OF PAYMENT AND SETTLEMENT ANALYSIS

NATIONAL ELECTRONIC FUND TRANSFER year 2006 2007 2008 2009 2010 Total outward transaction 3955.25 7192.33 8353.58 13087.66 30051.33 Received Inward transaction 2775.58 4698.92 5606.83 12658.83 19528.25

REAL TIME GROSS TRANSCATION SYSTEM Total outward Received Inward year transaction transaction 2006 1306.25 3843.67 2007 2943.08 22878.75 2008 4769.14 35436.10 2009 61166 124128.25 2010 90239 139494.58

INFERENCE FROM ANALYSIS

The growing trend in the usage of various modes of payment is a clear indication of the momentum acquired in the area of payment systems. The overall turnover in RTGS / NEFT payment and settlement systems rose during 2006-2010 it is on top during 2010 sharply. Turnover in RTGS now constitutes the largest component, followed by foreign exchange clearing. From this we conclude that most institutions were using a mix of paper and electronic mode of payment for effecting their payments, an increasing trend of usage of electronic modes of payments is being observed. Institutions with higher level of adoption of technology were more forthcoming in migration to electronic payment instruments. A major proportion of large and MNC clients, financial institutions have emerged as early adopters of electronic payment systems.

In electronic mode of payments most large Corporates prefer RTGS mode of payment for instant and large payments and NEFT for low value transactions for their day to day payment obligations. The use of ECS for making dividend payments, vendor payments, salary payments etc are increasing. The use of ECS has reduced paper work and increased speed of transfers adding to business growth as well as increased customer convenience /satisfaction. In most cases, the industries that have successfully migrated to new electronic modes of payments, where successful in migrating their vendors to accepting payments in electronic modes, hence bringing in efficiency to their whole processing cycle. These industries have also experienced definite savings in payment processing expenses (saving in stationery, postal/courier expenses and other charges).

New Projects / Major Initiatives

The evolving payment systems scenario offers new challenges and opportunities to all segments of this industry. Large corporate bodies have taken number of initiatives for the adoption of new payment modes. They have been able to identify cost advantages in the migration to new payment instruments. Further, the implementation of ERP systems at the industries, with the support from banks facilitated the migration to new payment modes.

Implementing a new and feature rich RTGS system The need to migrate to a new version of RTGS that could leverage on advancements in technology, provide for scalability in volumes, parameterise more features in line with similar facilities available in other countries, result in more flexibility in operations, better liquidity saving features, etc., and would be pursued. India Money Line A 24x7 system for one-to-one funds transfers The existing NEFT system operates during weekdays from 9 am to 5 pm and on Saturdays from 9 am to 12 noon. The Bank would pursue the suggestion to consider the need to extend NEFT to function on a 24x7 basis or to develop a new system akin to the Faster Payments Service in the UK which operates on a 24x7 basis. India Card A domestic card initiative The concept of a domestic payment card (India Card) and a PoS switch network for issuance and acceptance of payment cards would be looked into. The need for such a system arises from two major considerations (a) the high cost borne by the Indian banks for affiliation with international card associations in the absence of a domestic price setter (b) the connection with international card associations resulting in the need for routing even domestic transactions, which account for more than 90% of the total, through a switch located outside the country.

 Redesigning ECS to function as a true Automated Clearing House (ACH) for bulk transactions Currently, Local ECS (to facilitate bulk electronic transactions with one-to-many and many-to-one variants) is operational at 76 centres. Centralization of this process is already underway with the launch of credit variant of NECS at Mumbai (and RECS on a pilot basis). The debit variant is also being planned for implementation. The ECS / NECS solution is internally developed and has been in use since long and the need for building a technology and feature-rich ACH network by totally redesigning the existing ECS to provide end-to-end processing in a straight-through manner would be examined. Mobile payments settlement network Mobile phones are expected to emerge as an important channel for transmission of payment instructions. Efficient mobile payments would require real time transfer of funds with adequate security. Currently all inter-bank mobile transfers are payment instructions for settling funds through existing payment systems. Mobile banking (also known as M-Banking, mbanking, SMS Banking etc.) is a term used for performing balance checks, account transactions, payments, credit applications etc. via a mobile device such as a mobile phone or Personal Digital Assistant (PDA). The earliest mobile banking services were offered via SMS.
Application functionality

The mobile banking facility can be provided to mobile phone users through a client or a web based access. . .

User Authentication

1. User uses the browser or the client to connect to the mobile banking server located at the 3rd party site. The connection over the mobile network is encrypted using public/private key. The public keys can be transferred during the client installation on the mobile phone or when the client first communicates with the server using the browser.

User requesting a transaction

1. The mobile banking server asks for re-authentication for critical transactions. 2. Re-authentication with the mobile banking sever ensures that critical transactions are verified and mapped to the user. 3. The re-authentication can be restricted with the vendor only; the user need not authenticate with the bank every time a transaction is performed. Again this depends on the role played by the vendor. 4. User re-enters the ID. 5. Server authenticates the mobile user and forwards the data to the bank on how to process the mobile users service request. For e.g., checking the account balance service, the mobile banking server will contact the banks server on how to process the request.
Bank processing the transaction

1. The bank server will ask for details required to service the user request 2. Taking the above example, the bank will ask for cheque number and this is forwarded by the mobile banking server to the end user. 3. The end user enters the details and sends it to the mobile banking server. 4. The server again asks for authentication. Once authenticated, the mobile banking server will forward the cheque number to the banks server. 5. This can be an optional check based on the criticality of the service requested. For e.g., if the bank provides fund transfer service, then it is good to check for the users identification. 6. The banks server will check the status of the cheque and provide the details to the mobile user via the mobile banking server.

Finally, this is just an example to show how the application should process requests from the mobile user. Based on the services provided by the bank, the security of the application can be built-in. For e.g., if the application allows fund transfer or bill payment, then the required security threats should be identified and mitigated. The important part is maintaining Confidentiality, Integrity and Availability while using this facility without comprising on functionality. Mobile Banking Services
Account Information

1. Mini-statements and checking of account history 2. Alerts on account activity or passing of set thresholds 3. Monitoring of term deposits 4. Access to loan statements 5. Mutual funds / equity statements 6. Insurance policy management 7. Status on cheque, stop payment on cheque 8. Ordering cheque books 9. Balance checking in the account 10. Recent transactions 11. Due date of payment (functionality for stop, change and deleting of payments) 12. PIN provision, Change of PIN and reminder over the Internet

13. Blocking of (lost, stolen) cards

Payments, Deposits, Withdrawals, and Transfers

1. Commercial payment processing 2. Bill payment processing 3. Peer to Peer payments 4. Withdrawal at banking agent 5. Deposit at banking agent
Investments

1. Portfolio management services 2. Real-time stock quotes 3. Personalized alerts and notifications on security prices 4. mobile banking Marketing: Awareness of thes payment instrument would depend on the marketing campaigns of the service providers. The marketing campaigns educate the customers on the advantages, convenience and safety of the payment instrument. The level of transparency of the campaigns and the confidence gained by the customers during the campaign would facilitate large scale migration to these payment modes.

Conclusion
Electronic payment products are expected to provide speedier, cheaper and hassle free payment experience to customers in comparison to traditional paper based payment instruments. The evolution of electronic payment products in the country have progressed through two main phases - (i) introductory phase and (ii) rationalization phase. During the introductory phase, electronic products like ECS and EFT were introduced the country by Reserve Bank of India. These systems were decentralized serving the population of specific areas. The focus of Reserve Bank of India during the rationalization phase has been to introduce centralized payment solutions. This coincided with the implementation of Core Banking Solutions/ centralized liquidity management solutions in banks. The RTGS, NEFT and NECS provided settlement at a central location. The payment and settlement system constitutes the backbone of the financial sector and enables conclusion and settlement of financial contracts. The country has made phenomenal progress in enhancing the reach and improving the efficiency of the national payment system in which the RBI and the banking system have been equal partners. Creating a world-class payment system in the country is a long, arduous but an exciting journey in which we have to constantly keep striving to better past achievements. It is sure that banking community present here would make dedicated and systematic efforts in this direction to meet the challenges ahead and actively contribute to realizing vision for the payment system that have set for them.

International Trade
Introduction :
International finance is focused on the global business which involved in the sale and/or purchase of goods and/or services internationally. It is essential to understand methods of payment available for international business transactions, the documentation required to obtain or initiate payment, and the risks involved.

International Regulations
Identifying the various options available in these organizations provides an opportunity to improve chances for timely payment from their buyers.

ICC Uniform Customs and Practice (UCP) for Documentary Credits Uniform Customs and Practice-Electronic Supplement (eUCP) Uniform Rules for Collections ICC International Court of Arbitration INCOTERMS WTO

ICC The International Chamber of Commerce was founded in 1919 with a goal to serve world business by promoting trade and investment, open markets for goods and services, and the free flow of capital. ICC activities cover a broad spectrum--resolving disputes through arbitration, making the case for open trade and the market economy system, helping business become self-regulated, fighting corruption, and combating commercial crime. ICC model contracts make life easier for small companies that cannot afford high legal costs by providing templates.

ICC is a pioneer in business self-regulation of e-commerce. ICC codes on advertising and marketing are frequently reflected in national legislation and the codes of professional associations. ICC has direct access to national governments all over the world through its national committees. The organization's Paris-based international secretariat feeds business views into intergovernmental organizations on issues that directly affect business operations. The ICC also sets rules and standards:
o

Arbitration under the rules of the ICC International Court of Arbitration is on the increase. Since 1999, the Court has received new cases at a rate of more than 500 a year. ICC's Uniform Customs and Practice for Documentary Credits (UCP 500) are the rules that banks apply to finance billions of dollars worth of world trade every year.

ICC Incoterms are standard international trade definitions used every day in countless transactions.

Uniform Customs and Practice (UCP) for Documentary Credits International standards of letter of credit practices were established for bankers by the International Chamber of Commerce. the UCP has been revised about every ten years to keep up with changing practice; the most recent revision, UCP600, was completed in 2006 and was put into effect July 1, 2007. Although the UCP defines rights and obligations of the various parties in a letter of credit transaction, it is not law; so any given letter of credit is subject to the UCP only to the extent indicated in the letter of credit itself.

Uniform Customs and Practice Electronic Supplement (eUCP) The electronic supplement to UCP 500 was first launched in April 2002. It was also updated and is now part of the UCP600. The eUCP provides a general framework of principles for dealing with the electronic documents (shipping, customs clearance and banking documents) being presented in letter of credit transactions. This document outlines the steps to authenticate documents and gives presentation requirements as well as the steps to take if a document is corrupted. The creation of this supplement shows the need and willingness of the ICC to maintain its currency in the world of business and the changes in technology that affect business. Uniform Rules for Collections The Uniform Rules of Collections are the international standards of draft collection practices established for bankers by the International Chamber of Commerce. The Uniform Rules are not law but are more properly viewed as a handbook for banks used to establish common understanding of terminology and expectations.

ICC International Court of Arbitration The International Chamber of Commerce has applications that can impact timely payments. In particular, there are arbitration mechanisms available that can help parties reach an amicable settlement for payment issues. A final and enforceable decision can generally be obtained only by recourse to the courts or by arbitration. Because arbitral awards are not subject to appeal, they are much more likely to be final than are the judgments of courts of first instance. Although arbitral awards may be subject to being challenged (usually in either the country where the arbitral award is rendered or where enforcement is sought), the grounds of challenge available against arbitral awards are limited. INCOTERMS The Incoterms are internationally accepted commercial terms defining the respective roles of buyer and seller in the arrangement of transportation and other responsibilities and clarifying when the ownership of the merchandise transfers from seller to buyer. They are used in conjunction with sales agreements, payment terms and other methods of transacting sales.

EXW (Ex Works)

Title and risk pass to the buyer, including payment of all transportation and insurance cost from the seller's door. Used for any mode of transportation. Title and risk pass to the buyer, including transportation and insurance costs when the seller delivers goods cleared for export to the carrier. The seller is obligated to load the goods on the buyer's collecting vehicle; it is the buyer's obligation to receive the seller's arriving vehicle unloaded.

FCA (Free Carrier)

FAS (Free Alongside Ship) FOB (Free On Board) CFR (Cost and Freight) CIF (Cost, Freight) CPT (Carriage Paid

Title and risk pass to the buyer, including payment of all transportation and insurance costs once delivered alongside ship by the seller. Used for sea or inland waterway transportation. The export clearance obligation rests with the seller.

Free On Board and risk pass to the buyer, including payment of all transportation and insurance costs once delivered on board the ship by the seller. Used for sea or inland waterway transportation.

Title, risk and insurance costs pass to the buyer when delivered on board the ship by the seller who pays the transportation costs to the destination port. Used for sea or inland waterway transportation.

Title and risk pass to the buyer when delivered on board the ship by the seller who pays transportation

Insurance and and insurance costs to destination port. Used for sea or inland waterway transportation.

Title, risk and insurance costs pass to the buyer when delivered to carrier by the seller who pays

To) CIP (Carriage & To) DAF (Delivered at Frontier) DES Ship) DEQ (Delivered Ex Quay Duty Paid)

transportation costs to destination. Used for any mode of transportation.

Title and risk pass to the buyer when delivered to carrier by the seller who pays transportation and

Insurance Paid insurance costs to destination. Used for any mode of transportation.

Title, risk and responsibility for import clearance pass to the buyer when delivered to the named border point by the seller. Used for any mode of transportation.

Title, risk, responsibility for the vessel discharge and import clearance passes to the buyer when the transportation.

(Delivered Ex seller delivers goods on board the ship to destination port. Used for sea or inland waterway

Title and risk pass to the buyer when delivered on board the ship at the destination point by the seller who delivers goods on dock at destination point cleared for import. Used for sea or inland waterway transportation.

DDU (Delivered Duty Unpaid)

Title, risk and responsibility of the import clearance pass to the buyer when the seller delivers goods to the named destination point. Used for any mode of transportation. The buyer is obligated for import clearance. The seller fulfills his obligation when goods have been made available at the named place in the country of importation.

DDP (Delivered Duty Paid)

Title and risk pass to the buyer when the seller delivers goods to the named destination point cleared for import. Used for any mode of transportation

Funds Remittance The following funds remittance tools are used to move funds between buyers and sellers. They are not methods of payment but can be used in conjunction with various methods of payment.

Remittance methods

Cheque Banker's Drafts Electronic Funds Transfers Money Orders Cash or Bank Notes Credit Cards SWIFT Cheque

A check is a negotiable instrument issued against deposited funds to pay a specified amount of money to a specific person/company upon demand. This method of fund remittance is normally utilized for an international transaction when a local country representative will pick up a check or the check is given directly to the international manager by the buyer. Checks can be drawn on banks located in any country depending on where a buyer holds accounts. A check drawn on a bank in a sellers country is less risky since the seller can verify availability of funds. The most risk is found with a company check drawn on a bank outside the sellers country. In order for the seller to receive funds, a check must be deposited/cashed. If the check is deposited in a sellers account and the check is drawn on an overseas bank, the funds will not be available to the seller until the check is sent overseas for clearance and the funds are transferred to the sellers bank. The relationship between the banks involved, the countries involved, and the currency of the check will determine how long it will take and the fees that will be charged. Some examples follow:

Bill of Exchange-- an order by one person for a second person to pay a third. The tenor is the period of time from issue of the bill of exchange until maturity. Clean-- without supporting documentation Documentary-- with supporting documentation Sight-- on demand, calling for payment as soon as presented to the drawee Term/time/usance-- payable at a fixed future date or at a determinable future date Draft-- an instrument signed by a drawer to a drawee requesting payment at a future time to a third party, often the drawer. Bankers Drafts

This draft is similar to a check. However, it is a time draft drawn on a bank by a bank; and once accepted by the drawee bank, it becomes an unconditional obligation of the bank to honor at maturity. Electronic Funds Transfers Electronic funds transfers (also commonly known as wire transfers or TT) are a quick and effective method of transferring money between buyers and sellers, in particular when buyer and seller are located in different countries. This term is often misused in international transactions to mean a prepayment, which is not the case, since funds can be electronically transferred at any time during the transaction as agreed by buyer and seller.

A customer/buyer contacts its bank and arranges for the funds transfer.

A seller's bank name, address, ABA number, routing number and account number are identified as the receiving bank and recipient respectively. The remitting bank issues a payment order to the receiving bank requesting the payment to be credited to the third party beneficiary or the seller. The remitting bank at the request of its customer, called the "by order of" party, issues a funds transfer. The receiving bank must be a correspondent of the remitting bank to the extent that the receiving bank can verify the authenticity of the instructions. Payment orders are sent by telex or via an inter-bank telecommunication system known as SWIFT. The receiving bank will honor requests sent to it by remitting banks only when the receiving bank feels assured that the remitting bank will reimburse it for any outlay of funds, which can be accomplished in any of the following ways: A remitting bank can assure reimbursement by authorizing the receiving bank to charge its account with them. This rule applies when the remitting bank requests payment to be made in the receiving bank's local currency. A remitting bank can assure reimbursement by crediting their account with the receiving bank. In the case of American banks remitting US dollars abroad, the credit would be posted to the receiving bank's US dollar account. If foreign banks specify that they have credited the account of a US bank, then the credit would normally be in their local currency.

Money transfers can also be accomplished between remitting and receiving banks even when there are no direct accounts between the two. To do so, the remitting bank transfers the funds into the receiving bank's account via their US correspondent bank. The US correspondent bank, the covering bank, would then advise the receiving bank of the credit.

When payment is to be made in the local currency of the receiving bank and the remitting bank does not maintain an account in that particular currency, payment must be made through a third correspondent bank. This action is usually accomplished by requesting the

covering bank to issue a payment order on behalf of the remitting bank. In this case, the true remitting bank would be the third party bank while the original remitting bank would be an additional "by order of" party to the transfer. No direct payment order would be sent by the original remitting bank to the receiving bank. The original remitting bank would authorize the covering bank either to charge its account or would transfer covering funds by wire transfer to the correspondent bank. An exchange rate would have to be agreed upon between the remitting bank and the correspondent bank.Example:

If ABC Bank receives an application for a payment of 400,00 Pakistan rupees in Pakistan and ABC Bank does not maintain a Pakistan rupee account, payment could be made through a third party correspondent bank such as XYZ Bank in New York. ABC Bank would request XYZ Bank to issue their payment order for 400,000 Pakistan rupees on behalf of ABC Bank's customer and authorize XYZ Bank to charge ABC Bank's account in US dollars, using a prevailing rate of exchange. If the rate of exchange were 0.0292, then XYZ Bank would charge ABC Bank's account $11,680.00 plus funds transfer charges and issue the payment order directly to the receiving bank for the payment of 400,000 rupees. XYZ bank then would assure reimbursement to the receiving bank by authorizing it to charge its Pakistan rupee account. For exporters (sellers), the primary concern is receiving fund transfers in a timely fashion. The fastest method of doing so is using an overseas remitting bank that maintains an account with the beneficiary's receiving bank. Then fund transfers are typically received within one to two business days. However, if the transfer must be made through an intermediary bank, such as the remitting bank's US correspondent, it will take longer, typically four to seven business days. It is critical that a foreign buyer asked to remit payment by wire transfer has the following information:

the seller's full name and address the city and state of the seller's bank

the bank's ABA and routing number the seller's account number the exact name in which the account is maintained the amount to be wired the currency of the funds to be wired

A buyer's bank should instruct its US correspondent bank that the payment is to be wire transferred to the seller's bank. A failure to provide specific instructions to the buyer can result in delays in receiving funds transfers. Errors can even result in electronic funds transfers being credited to the wrong account or returned to the remitting bank as undeliverable Cash or Bank Notes The exchange of bank notes or cash is seldom used in international transaction because of the risk of loss or forgery. Money Orders A money order is a financial instrument issued by a bank or other institution allowing the individual named on the order to receive a specified amount of cash on demand. It is often used by people who do not have checking accounts. It is a limited tool since it can be used only for certain currencies in certain amounts.

Credit Cards With the increase in online business, international payments made through consumer/business credit cards are becoming more common. These transactions are limited to the credit available on the credit card and often incur high fees for a seller as well as a buyer for currency exchanges. SWIFT SWIFT was founded in 1973, as non-profit cooperative organization under Belgian law (with its HQ in La Hulpe, near Brussels in Belgium), by 239 banks spread over 15 countries. As of December 2008, SWIFT had linked nearly 9000 banks/institutions in 209 countries. The objective of SWIFT is to create a unified international transaction processing and transmission system to meet the ever growing telecommunication needs of the banking industry. It does not perform any clearing or settlement system. It also does not facilitate funds transfer Major features of SWIFT: It is owned by member banks. It is a basically a message transmission system, takings place world-over. It operates on a 24 x 7 basis. The messages are acknowledged i.e. either accepted or rejected. In India, most of the banks are members of SWIFT. These are connected to Swifts regional processor at Mumbai. Message formats The message formats for inter-bank transactions are standardized, some of which are as under

Customer directed transfers Inter-bank transfers Documentary credits or guarantees. Collection of cheque including travelers cheque Cash management Security of messages SWIFT uses the telegraphic test keys (that are traditionally used for authentication of amounts in messages between banks). It is automatically calculated on the entire message text. Any change in the message text, in this manner, is immediately detected. The information over the SWIFT network is secured and confidential. It makes use of encryption (a security control for ensuring data confidentiality) and checksum (a security control to prevent automatic changes during the transmission) SWIFT undertakes financial liability for the accuracy and timely delivery of all validated messages from the point these enter the network to the point they leave the network. In other words, the SWIFT is responsible for the messages between the regional processors of SWIFT and not between the regional processor and the individual banks. SWIFT provides protection against unauthorised access and protection of transmission (for loss or mutilation of the message, errors in transmission, loss of privacy, fraudulent alteration). Steps In Transmission 1. Preparing message 2. Verifying message

3. Authorizing message 4. Transmitting message 5. Receiving system acknoeledgment

Most documentary credits are transmitted electronically either by telex or through the SWIFT interbank telecommunication system. When documentary credits are transmitted in this way the telecommunication itself becomes the actual documentary credit or operative instrument.

Sometimes, an issuing bank will send a brief telex/SWIFT message to the advising bank to let the bank know the "brief details" of the documentary credit and to advise that "full or complete" details will follow by mail. The issuing bank must send the actual documentary credit by mail without delay. The "pre-advice" is not the operative instrument. Once an issuing bank has issued a preadvice, it must issue the operative instrument without delay unless the pre-advice indicates that the issuing bank may choose not to issue the credit. begin production or otherwise act as if the credit were on its way.

If a bank uses an advising bank to have the documentary credit advised to the beneficiary, it must also use the services of the same bank for advising an amendment(s).

Methods of payment
Methods of payment available to buyers and sellers conducting international transactions.

To identify the methods of payment available for international transactions.

To determine when to apply different methods of payment. 1. Cash in Advance (Prepayment) 2. Documentary Collections 3. Letters of Credit 4. Open Account 5. Clean Payments 6. Combining Methods of Payment Cash in Advance/Prepayment

The buyer agrees on a price for the goods and makes the payment to the seller before the goods are shipped. This method is typically used where the buyer can negotiate a significant cash discount for taking on the trade risk. It could also be possible that the buyer is unable or unwilling to open a letter of credit.

Time of Payment Goods Available to Buyer

Prior to manufacturing and/or shipping, through the agreed upon method (cash, wire transfer, check, credit card, etc.). After payment is received.

Seller does not ship per the order (quantity, product, and quality, Risks to Buyer shipping method). Seller does not ship when requested.

Financing

Buyer must have cash or financing available

Documentary Collections A documentary collection is a payment technique provided by a bank acting as a collection and paying agent. The seller receives payment from the bank's correspondent bank (known as the remitting bank) on the delivery of the shipping and financial documents. The buyer then makes the payment to the bank. The seller retains title of goods until the payment or at least promise of payment is received. The difference between a documentary collection and a letter of credit is that under a documentary collection, the bank does not guarantee payment to the seller. This is one of the reasons why documentary collections are cheaper and less complicated than letters of credit. One of the greatest problems with documentary collections is that they offer less security for a seller than a letter of credit. Credits, political, and transfer risks, for instance, are not covered under a documentary collection.

Documents against Payment (D/P) Collection Under a D/P collection, the exporter ships the goods, and then gives the documents to his bank, which will forward them to the importers collecting bank, along with instructions on how to collect the money from the importer. In this arrangement, the collecting bank releases the

documents to the importer only on payment for the goods. Upon receipt of payment, the collecting bank transmits the funds to the remitting bank for payment to the exporter. Time of Payment: After shipment, but before documents are released Transfer of Goods: After payment is made on sight Exporter Risk: If draft is unpaid, goods may need to be disposed Documents against Acceptance (D/A) Collection Under a D/A collection, the exporter extends credit to the importer by using a time draft. In this case, the documents are released to the importer to receive the goods upon acceptance of the time draft. By accepting the draft, the importer becomes legally obligated to pay at a future date. At maturity, the collecting bank contacts the importer for payment. Upon receipt of payment, the collecting bank transmits the funds to the remitting bank for payment to the exporter. Time of Payment: On maturity of draft at a specified future date Transfer of Goods: Before payment, but upon acceptance of draft Exporter Risk: Has no control of goods and may not get paid at due date Terms associated with documentary collections Buyer = Importer Seller = Exporter

Remitting Bank = Exporters Bank >> receives payment Collecting Bank = Importers Bank >> transmits funds from buyer to seller Bill of Exchange/Draft document issued by exporter and used for remittance of funds Time/Usance Bill of Exchange tenured at 30, 60, 90, 120 or 180 days, etc. Letters of Credit

A letter of credit is a bank instrument that can be used to even the risk between a buyer and a seller since a buyer is guaranteed to receive payment if when he/she has complied with the exact requirements of this buyer. A letter of credit offers a seller numerous advantages but only if that seller complies exactly with its terms and conditions of the transaction. In addition to providing reduced risk for both a seller and a buyer, there are many variables that can be used with a letter of credit to reduce the political and commercial risks that may accompany the transaction as well as provide extended terms to a buyer through the letter of credit instrument. Characteristics of a Letter of Credit Applicability Recommended for use in new or less-established trade relationships when satisfied with the creditworthiness of the buyers bank. Risk Risk is evenly spread between seller and buyer. Pros Payment after shipment

 A variety of payment, financing and risk mitigation options Cons Process is complex and labor intensive Relatively expensive in terms of transaction costs Open Account This method of payment involves an agreement between the seller and the buyer whereby the goods are shipped to the buyer and the buyer makes the payment at a predetermined date in the future. In this case, it is the seller who is taking on all the trade risk. As agreed between a buyer and seller, net 15, 30, 60 day terms, etc., from date of invoice or bill of lading

date. Goods Available to Buyer Before payment (depending on how the products are shipped and the length of payment option). Buyer defaults on payment obligation. Risks to Seller Delays in availability of foreign exchange and transferring of funds from buyers country occur. Payment is blocked due to political events in buyers country. Seller does not ship per the order (product, quantity, quality, and/or shipping method). Seller does not ship when requested, either early or late. Seller has absolute trust that buyer will accept shipment and pay at agreed time. Seller is confident that importing country will not impose regulations deferring or blocking transfer of Use payment. Seller has sufficient liquidity or access to outside financing to extend deferred payment terms. Used more regularly in international transactions to avoid high banking fees.

Time of Payment

Risks to Buyer

Combining Methods of Payment The important thing to remember about methods of payment is that they are not absolute. They can be combined in many ways to reduce risk for all of the parties involved. For example, should a new customer require custom-made products, but cannot afford 100% prepayment, an exporter could offer 50% prepayment to cover the cost of manufacturing and 25% payment at invoice date and 25% payment 90 days after invoice. Clean Payments: Clean Payments are the means of forwarding funds overseas. These can be made by: 1. Telegraphic Transfer - a message forwarded electronically to an overseas branch or a correspondent bank, instructing it to pay a named party (beneficiary) a specified sum of money by order of the remitter (applicant). 2. Draft - similar to a bank check but drawn on an overseas bank. Payment is made to the payee after adequate verification of identity.

TRADE TRANSCATIONS
Trade finance involves commercial transactions between buyers and sellers in different countries. It presents a number of difficulties for the firms involved.

One of the most popular instruments used in international trade is letters of credit. A letter of credit is a guarantee of payment by the buyer's bank to the seller, if certain terms and conditions stipulated in the letter of credit are met.

Definition:
Letter of credit (more secure for seller as well as buyer): It is the assurance given by the opening bank to make payment at sight or on due against production of documents in compliance with the terms and conditions of the LC Types of L/Cs: Letters of credit can differ greatly with regard to their underlying terms and conditions. The following are the kinds of letters of credit structures Revocable A revocable letter of credit can be amended or canceled by the buyer at any time without giving prior notice or warning to the seller. For this reason, a revocable letter of credit does not serve as a payment guarantee. It is only a payment agreement because it is little more than an expression of intent on the buyer's behalf. The seller, therefore, bears a great deal of credit risk because the letter of credit may be amended or canceled while the goods are in transit and before documentation is presented for payment. The seller would then be forced to request payment directly from the buyer. Revocable letters of credit are seldom used because the sellers could find themselves exposed to default risk in much the same way as they would with open account trading.

Irrevocable An irrevocable letter of credit cannot be amended or canceled without the agreement of the issuing bank, the confirming bank (if the letter of credit is confirmed), and the seller. The seller is, therefore, assured of payment, provided the prescribed documents are presented and are in order. The issuing bank is compelled to guarantee payment even if the buyer does not pay. Therefore, there need not be the same level of trust between the seller and buyer as there must be in the case of a revocable letter of credit or cash payment. Most changes made to an irrevocable letter of credit will tend to favor the seller, as the seller must agree to any amendment. Examples of such amendments include an extension of the shipment date or an increase in the amount due to the seller. All letters of credit are irrevocable unless it is expressly stated otherwise in the letter of credit. Irrevocable Confirmed Letters of Credit An irrevocable confirmed letter of credit is an irrevocable letter of credit to which the advising bank adds its confirmation. The buyer will request the advising bank to do so if the seller is not satisfied with assurances from the issuing bank. An irrevocable confirmed letter of credit gives the seller a double assurance of payment. The advising/confirming bank is at risk when it confirms a letter of credit. Although an irrevocable confirmed letter of credit cannot be canceled without the consent of all parties, the issuing bank can refuse to honor it leaving the advising/confirming bank at a loss. The issuing/confirming bank can refuse to honor the letter of credit if the seller does not comply with the terms and conditions specified in the letter of credit, for example, if the documents are presented late or are not in order. Back to back letter of credit

Arrangement in which one irrevocable L/C serves as the collateral for another; the advising bank of the first L/C becomes the issuing bank of the second L/C. In contrast to a 'transferable letter of credit,' permission of the ultimate buyer (the applicant or account party of the first L/C) or that of the issuing bank, is not required in a back-to-back L/C. It is used mainly by middlemen (intermediaries) to hide the identity of the actual supplier or manufacturer. Also called counter credit or reciprocal letter of credit Deferred payment That is paid a fixed number of days after shipment or presentation of prescribed documents. It is used where a buyer and a seller have close working relationship because, in effect, the seller (beneficiary of the L/C) is financing the purchase by allowing the buyer a grace period for payment. It differs from a sight draft or time draft in that no drafts are involved but the payment is guaranteed on the stated date. However, there being no draft, the beneficiary party's ability to discount or sell his or her right to payment is restricted. Also called usance letter of credit. Red clause L/C that carries a provision (traditionally written or typed in red ink) which allows a seller to draw up to a fixed sum from the advising or payingbank, in advance of the shipment or before presenting the prescribed documents. It is normally used only where the buyer and seller have close working relationship because, in effect, the buyer is extending an unsecured loan to the seller (and bears the financial risk and the currency risk). The red clause L/Cs was once popular in fur trade with China and wool trade with Australia.

Green clause In the case of a green clause letter of credit (letter of credit with advance payment) the beneficiary can request the advance payment of an agreed amount (defined in the terms and conditions of the letter of credit) from the correspondent bank. This is basically intended to finance

the production or purchase of the goods to be delivered under the letter of credit. Unlike the red clause letter of credit the advance is not paid out against receipt and the written undertaking of the beneficiary to subsequently deliver the transportation documents by an agreed date, but an additional document is also always required providing proof that the goods to be shipped have been warehoused Unconfirmed An unconfirmed irrevocable letter of credit provides a commitment by the issuing bank to pay, accept, or negotiate a letter of credit. An advising bank forwards the letter of credit to the beneficiary without responsibility or undertaking on its part except that it must use reasonable care to check the authenticity of the credit which it advised. It does not provide a commitment from the advising bank to pay, so the beneficiary is reliant upon the undertaking of the overseas bank. The beneficiary is not protected from the credit risk of the issuing bank nor the country risk. Confirmed L/C that adds the endorsement of a seller's bank (the accepting-bank) to that of the buyer's bank (the issuing bank). It provides the highest level of protection to the seller because not only the L/C cannot be canceled (or its terms changed) unilaterally by the buyer (the account party), but also both banks involved in the transaction guaranty its payment on its due (maturity) date.

Transferable Credit

Irrevocable L/C with two (and only two) successive beneficiaries. In this arrangement, the first beneficiary (an intermediary or importer's foreign representative) can assign part or whole of the L/C amount to a second beneficiary (the supplier or manufacturer). To be transferable, the L/C must be so marked by the issuing bank on the instructions of the buyer or importer (the account-party). On the instructions of the first beneficiary the advising bank can transfer it to the second beneficiary but not any further. Used extensively in the Far East (China, Japan, Korea, Singapore, Taiwan, among others). See also back to back letter of credit. In general, unless the letter of credit states that it is transferable, it is considered non-transferable. Revolving Single L/C that covers multiple-shipments over a long period. Instead of arranging a new L/C for each separate shipment, the buyer establishes a L/C that revolves either in value (a fixed amount is available which is replenished when exhausted) or in time (an amount is available in fixed installments over a period such as week, month, or year). L/Cs revolving in time are of two types: in the cumulative type, the sum unutilized in a period is carried over to be utilized in the next period; whereas in the non-cumulative type, it is not carried over. Standby Primarily a substitute for a performance bond or payment guaranty, this L/C is used mainly in the US where banks are legally barred from issuing certain types of guaranties. It serves as a parallel (collateral) payment source in case the primary source fails to meet its obligations in part or in full.

Payment Forms

Once the seller presents the documents to the issuing or advising/confirming bank, the settlement process begins. If an advising bank is involved, it will check the documents. Thereafter, it may accept, pay, or negotiate the letter of credit. It may also forward the documents to the issuing bank for settlement. The following forms of payment can be used to settle a letter of credit. Payment Acceptance Negotiation Sight

Settlement by payment, acceptance, or negotiation is only made if the buyers bank receives the required document before the buyer receives the goods. D/P Documents against Payment The export documents and the sight bill of exchange provided to a collecting bank are only made available to an importer when payment is made. The collecting bank then transfers the funds to the seller through the remitting bank. D/A Documents against Acceptance The export documents and a time/usance bill of exchange are sent to a remitting bank. The documents are then sent to a collecting bank with instructions to release the documents against a buyers acceptance of the bill of exchange.

Sight A sight letter of credit requires payment to be made once the documents have been presented and are in order .Payments are made immediately once the document are verified by the issuing bank .

Involved Parties:
The Buyer / Applicant / Importer

The buyer, also known as the applicant or the importer, enters into a letter of credit due to a certain lack of absolute trust in the seller's willingness and ability to supply the requested goods in the quantity and quality required. The buyer and the seller will therefore seek to agree upon a sales contract and a trade arrangement, such as a letter of credit, where the buyer can specify the: 1. Documents required before payment is made 2. Final date for receipt of these documents 3. Latest date for shipment of the goods in question Settlement by payment, acceptance, or negotiation is only made if the buyer's bank (issuing bank) receives the required documents before the buyer receives the goods. If the issuing bank finds everything in order, the buyer is notified and the payment is forwarded to the seller. The buyer's account is then debited by the appropriate amount. Beneficiary / Seller/Exporter

The seller, also known as the beneficiary or the exporter, enters into a letter of credit because they know in advance that they are entitled to payment once the documentary evidence required by the letter of credit is provided. The issuing bank is not liable for the performance of the underlying goods delivered to the buyer. The issuing bank's obligation to the buyer is to examine all the documentary evidence and verify that it meets all the terms and conditions of the letter of credit. A seller conforming to the letter of credit doesn't have to wait until the buyer is ready to pay. Instead, the seller receives payment from the issuing bank immediately or at a specified future date. Opening Bank / Importers Bank / Issues L/C This insures the seller against a loss should the buyer fail to make payment, because the bank as guarantor will pay the seller the amount specified in the letter of guarantee. The issuing bank, which is usually the buyer's bank, will issue a letter of guarantee to the seller on behalf of the buyer .This setup helps the buyer negotiate with the seller and avoids the situation where the buyer has to put up cash as a guarantee. The bank's role is therefore that of an intermediary. The issuing bank's liability to pay and to be reimbursed from the buyer becomes absolute upon the receipt of the documentation showing the seller has met the terms and conditions of the letter of credit. If the issuing bank is not satisfied with the creditworthiness of the buyer or with the terms and conditions of the request, it may refuse to issue a letter of credit addressed to the seller. Even in cases where the bank is satisfied, it will usually send the letter of credit through an advising/confirming bank in the seller's country. The letter of credit will then be issued in accordance with the information provided by the buyer in the request form. Advising Bank/ Exporters Bank/Advises L/C

Advising bank as a country bank usually a foreign correspondent bank of the issuing bank. Advising bank verifies the authenticity of the L/C, thereby providing the seller with protection against the receipt of a fraudulent L/C, advising bank in a transaction cannot advise the seller as to credit worth of issuing bank. Confirming Bank/ Advising Bank or 3rd Party Bank/Confirms L/C Confirming bank agree to honor a L/C issued by another bank. Negotiating Bank It is nominated by the seller, allows the seller to make payment to a local bank instead of having dealing with a foreign bank with which they may be unfamilier.Issuing Bank usually choose a negotiating Bank with international operations. Paying Bank/ Any Bank as Specified in L/C >> Pays the Draft Is the bank named in the L/C as being authorized to make payment.

Flow of transaction

The sales contract is entered between buyer and seller. If the buyer bank approves the credit risk of the buyer, it issues the LC. The issuing bank approaches the corresponding bank/advising bank in the sellers country to process the letter of credit. The seller is informed of the letter of credit by the confirming / advising bank. The seller ships the good and presents the documents at the advising / confirming bank. The advising / confirming bank examines the documents for compliance.

If confirmed, confirming bank pays the seller according to the method outlined in letter of credit. Issuing bank examines the documents and debit the buyer account if they are in order. The issuing bank forwards the documents to the buyer. The buyer presents the documents and takes the possession of goods.

Required Information To open a letter of credit in favor of the seller, the buyer must fill in an application form to their issuing bank. 1. Name of the buyer 2. Name and address of the seller 3. Name and address of the advising bank (usually chosen by the issuing bank) Name of the person(s) on whom any of the following payment mechanisms are to be drawn: a) bill of exchange b) draft c) check 4. Amount and currency (ISO currency code) of the credit 5. Amount of the letter of credit in words and figures 6. The buyer must specify the: a) exact total amount b) maximum amount c) approximate amount

7. Details of the documents required 8. Quantity and description of the goods 9. Place, destination, latest date, and terms of shipment 10. Types of letters of credit: a) revocable b) irrevocable c) irrevocable confirmed 11. Whether the letter of credit is settled by a) payment acceptance b) negotiation 12. How the letter of credit is to be advised by (air) mail or otherwise 13. Whether partial shipment or transshipment is allowed 14. Whether the letter of credit is to be transferable 15. Expiry date (last date for receipt of documents) 16. Period of time after the issuance date of the transport document(s) within which the document(s) must be presented.

Activities and Terms:

Advice review and approval of L/C Amendment change to L/C Confirmed the commercial, political and economic risk of the transaction absorbed by the confirming bank Discrepancy mistake in the documentation Documentation documents required within L/C Draft negotiable order to pay
o o

Sight Draft payment assured upon shipment and presentation of documents in compliance with its terms Time Draft bank assurance of payment at the maturity of the bankers acceptance with option of obtaining immediate funds by discounting the BA (30, 60, 90 days at sight or acceptance)

Irrevocable cannot be changed without approval from beneficiary or advising bank Issuance opening of L/C Negotiation review of documents Revocable can be changed without approval of beneficiary or advising bank

Typically the documents requested in a Letter of Credit are the following:

Financial Documents : Bill of Exchange Commercial Documents: Invoice is the bill for goods and services. It includes Name and address of seller Name and address of buyer

Description of merchandise Price FOB(Free on Board), CIF(Cost, Insurance and Freight ) ,DDU(Delivery duly Unpaid)

Packing list Draft the seller draws draft on issuing, confirming / advising bank for the amount agreed under letter of credit

Clean an order to pay Documentary shipping documents are attached

Shipping Documents :Transport Document, Insurance Certificate, Commercial, Official or Legal Documents Official Documents :License, Embassy legalization, Origin Certificate, Inspection Certificate Transport Documents

Bill of Lading: This is the document evidencing the receipt of goods for shipment the of bill of lading is to act as a recipt for merchandise shipped and carrier oblication is to transport their good to destination. 1. Non-negotiable bill of lading: The seller consigns the goods diretly to the buyer 2. Negotiable bill of lading: The issuing bank retains title to the goods until buyer has submitted required documents and bank satisfies all in order . (ocean or multi-modal or Charter party), Airway bill, Lorry/truck receipt, railway receipt, Mate Receipt,Cargo Receipt, Deliver Challan...etc

Insurance documents: Insurance policy, or Certificate but not a cover note. SWIFT MESSAGE TYPES FIN 700, FIN 701 Issue of Documentary credit MT 707 MT 202 MT 100 MT 999 MT 799 MT 420 MT 011 - Amendment of Documentary credit - General Institutional Financial Transfers - Customer Transfer - Free format - Free Format Doc.Credit - Tracers - Delivery Notification.

CHECKING OF LC DOCUMENTS Shipment before date of LC Name and Address of applicant for negotiation

LC expired for negotiation LC no and date LC amount exceeded Description of goods, quality Stale documents Some documents called for not submitted. Gross and net weight differs Shipping marks Port of loading / discharge Parial /transshipment

INVOIVE Not indicate delivery terms Description of goods Calculations Charges

BILL OF LADING On board notation

Claused BL Short shipment Late shipment Full of BL Freight indication Signature Class of BL not acceptable-charter party On deck shipment

AIRWAY BILL Flight no and date

INSURANCE All risk Dated later than shipment Claims payable Endorsement Under insurance Currency of LC

RELATING TO EXPORTS 1. I/E CODE NUMBER (IEC) - Every exporter must obtain from trade control authorities ICE number. 2. DECLARATION OF EXPORTS IN PRESCRIBED FORMS: GR FROM For exports made otherwise than by post (in duplicate) PP FORM For exports made by pp other than on VP or cod basis (in duplicate) VP/COD FORM For exports made by post on VP/COD basis (in one copy) SOFTEX FORM For export of computer software in non-physical form (in triplicate) 3. TIME LIMIT FOR REALISATION OF EXPORT PROCEEDS Within 6 months from the date of shipment Within 15 month for export made to India owned warehouse abroad established with the permission of R.B.I.

4. COUNTER SIGNING OF GR/PP FORMS BY Ads. 5. SUBMISSION OF EXPOTS DOCUMENTS 21 DAYS 6. SCRUTINY OF GR/PP FORMS. 7. TRADE DISCOUNT SHOULD BR DECLARED ON RELATIVE GR. 8. AGENCY COMMISION.

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Substitute Products
Bankers' Acceptances

Bankers' acceptances (also known as bank bills) are short-term finance instruments to facilitate international trade. A bankers' acceptance is created when one person signs an unconditional written order directing a bank to pay a certain sum of money on demand or at a definite time to another person, usually to finance the shipment or temporary storage of goods. The unconditional written order, also known as a time draft, is stamped 'accepted' by the bank. By accepting the draft, the bank agrees to pay the face value of the obligation if the buyer (the 'issuer' the party who drew the draft) fails to make payment. Since the accepting bank is taking on the risk of the buyer defaulting, it makes it easier for a buyer or seller to undertake international trade. In general, a bankers' acceptance is a less expensive form of short-term financing than a loan. Bankers' acceptances may be retained until maturity for full value or sold to investors When a bank accepts a time draft, it makes an unconditional obligation to pay a specified amount at maturity, either to the party presenting the draft or to the holder of the draft if the manufacturer discounted the acceptance. If discounted, the manufacturer would remain secondarily liable to the holder (purchaser/discounter) of the acceptance in the event of default by the bank.

Open Account Trading Open account trading works as follows. A company sells goods to another. It then sends the buyer an invoice, and in due course (usually within 30 days) it receives payment. Open account trading allows settlement to be achieved at a lower cost not least because credit lines will not be used to underwrite transactions. The savings that companies make will depend on the number of transactions, the level of automation, and so on. However, open account trading presents an administrative burden for traders, because it entails taking data from multiple sources, consolidating it and matching commercial invoices/bills of lading against purchase orders. This manual process is both time-consuming and subject to error. With an L/C, the issuing bank handles this administration in return for a fee. Many companies may choose to outsource this work to banks, because of their expertise in the administration of trade documentation, and the fact that they have invested in the technology and have the geographic coverage to facilitate global trade. Open account trading leaves the seller fully exposed to non-payment or default on the part of buyers. Sellers may have to look at receivables financing or factoring to manage their working capital demands. The cost of capital can be disproportionately high for small suppliers, even offsetting the savings made through the elimination of L/C fees. Therefore, there will probably always be a need for L/Cs in many cases Trade-Related Guarantees Comparison with Letters of Credit The differences between a trade-related guarantee and a standard letter of credit. Name Trade-Related Guarantee Letter of Credit

Definition

An agreement between three parties whereby the first party, the bank, guarantees the second party, the beneficiary, that the contract.

A bank letter of credit is a cash guarantee between three or more parties. The first, the party, the issuing bank, to issue a guarantee to make payment to the third party, the beneficiary (exporter), on the receipt of specific documentation. The banks examine the quality and liquidity

third party, the applicant (exporter), is capable of performing the applicant (importer), applied to the second

Pre-

The banks look at the applicant's entire business operation,

Qualification checking for adequate financial resources, necessary experience, of the collateral available to the bank in case organization, and existing workload. The bank will also look at there is a demand on the letter of credit. If the the applicant's profitability and whether it has the management skills to successfully complete the transaction. Borrowing Capacity The issuance of trade-related guarantees has no effect on the viewed as a credit enhancement. banks are satisfied that the applicant can reimburse them if demand is made upon the letter, there is no further pre-qualification. Specific assets are pledged to secure a bank an existing line of credit and is reflected on the applicant's financial statement as a Duration contingent liability. Trade-related guarantees can remain in force for the duration of a A letter of credit is usually date-specific, generally for up to one year. A letter of credit can be obtained through banking or lending institution.

applicant's bank's line of credit, which in some instances, can be letter of credit. A letter of credit can diminish

contract. How to Obtain Trade-related guarantees can be obtained through banks or through insurance companies in the form of a surety bond.

Claims

If the applicant and the beneficiary disagree on contract

The bank will pay on a letter of credit upon required documentation has been supplied. Widely recognized

performance issues and the beneficiary declares the applicant in demand of the beneficiary, assuming the default, the bank must decide whether to pay the beneficiary. International Gaining recognition

Changes in International Trade Practices

The growth in global trade over the past decade has put increasing demands on the financial industry to find efficient methods of making international payments in exchange for the delivery of goods and services. Many companies have already tried to limit their number of trading partners so as to concentrate their orders among a small few trading partners. They can then quickly establish trust with these partners through service level agreements and so on. The advantage of this is that when it comes to settling accounts, there is less need for expensive and slow financing arrangements such as letters of credit.

Facilitating International Trade Payments Trade Card

There are organizations that have been trying to speed up payments in international trade. One such organization is Trade Card.

Based in the United States, Trade Card facilitates trade transactions from the initial purchase right through to settlement. It differs from other arrangements in that it allows companies to initiate, conduct, and settle transactions completely online. For example, buyers and sellers can create all their purchase orders and invoices in an electronic format. This means that documents may be easily compared and any discrepancies can be quickly identified and resolved by each party being sent a discrepancy notice by e-mail. If and when the transaction is accepted by the system, an e-mail notice is sent to the buyer, requesting the movement of the money. The Trade Card solution aligns the documentary and financial requirements of a transaction with the physical movement of goods, eliminating time-consuming and error-prone manual processes. Under this system sellers receive payment a lot earlier and this allows the buyer to negotiate a more favorable price. The seller's fee (typically USD 100) is paid for many times over because of the savings the efficiency brings. Other companies that tried to break into this market with similar technologies were Trade Beam, CCEWeb, and UPS Capital Bolero.net Bolero.net was the banking industry's first commercially successful attempt at providing trade documentation in electronic format. Bolero is partially owned by SWIFT, an organization itself owned by banks that are its members. SWIFT is both an operator of Bolero's services and a user of Bolero as the technology developer for its own SWIFT Net Trade Services Utility (TSU). Bolero uses the strong authentication associated with SWIFT's system so it provides a secure electronic bank-to-corporate means of communication, effectively replacing today's traditional methods such as paper-based mail and fax communications.

Bolero delivers transaction visibility, predictability, speed, accuracy, and security. Bolero is fast becoming the dominant platform for corporate to bank automation of the financial supply chain. Secondary Market in Letters of Credit Another relatively recent development in global trade finance has been the development of a secondary market in letters of credit. LTPtrade was founded in 1999. It is a specialist provider of advisory services, process, technology, and capital modeling solutions for trade finance. In 2001, LTPtrade.net, a dealing and information platform, completed the first ever electronic auction of a 'participation' in a letter of credit. The auction involved a North American bank selling a participation in a USD 7.7 million letter of credit obligation of Korea Development Bank. Some of the largest banks now manage their trade finance risk exposure by selling on the participation in a letter of credit in the secondary market. To explain, the holder of trade finance debt passes on the risk of non-payment to a third party but retains title to the instrument. This is achieved using a participation contract. The availability of a secondary market in the letter of credit market creates a greater level of liquidity in letters of credit. Greater secondary liquidity improves banks' ability to book new business from their corporate customers. There are over 450 officers from 92 different banks, financial institutions, and branches across 22 countries that are members of the LTPtrade.net platform. Open Account Trading

Despite all the technological developments that have occurred in the past decade, nothing seems to be able to stop the growing popularity of open account trading. Open account trading works as follows. A company sells goods to another. It then sends the buyer an invoice, and in due course (usually within 30 days) it receives payment. Open account trading allows settlement to be achieved at a lower cost not least because credit lines will not be used to underwrite transactions. The savings that companies make will depend on the number of transactions, the level of automation, and so on. However, open account trading presents an administrative burden for traders, because it entails taking data from multiple sources, consolidating it and matching commercial invoices/bills of lading against purchase orders. This manual process is both time-consuming and subject to error. With an L/C, the issuing bank handles this administration in return for a fee. Many companies may choose to outsource this work to banks, because of their expertise in the administration of trade documentation, and the fact that they have invested in the technology and have the geographic coverage to facilitate global trade. Open account trading leaves the seller fully exposed to non-payment or default on the part of buyers. Sellers may have to look at receivables financing or factoring to manage their working capital demands. The cost of capital can be disproportionately high for small suppliers, even offsetting the savings made through the elimination of L/C fees. Therefore, there will probably always be a need for L/Cs in many cases

Interbank Mobile Payment Service (IMPS) IMPS facilitates person to person fund transfer on a real time 24 X 7 basis. Unique feature of the service is instant money transfer and both the remitter and the beneficiary receiving an sms of their account debited/credited within a minute of doing the transaction.

This is how the system works I wish to send money Register your mobile number with your bank to link to your account. Share your Mobile number and MMID with the remitter Ask the remitter to send money using your Mobile number and MMID Check the confirmation sms for credit to your account from the remitter I wish to receive money Register yourself for mobile banking service with your Bank Get your MMID and MPIN from your Bank Download and activate the mobile banking application on your mobile phone. Get beneficiarys Mobile number and MMID Send money to the beneficiary following the menu options in the mobile banking application Check the confirmation sms for debit to your account and credit to beneficiary account A P Hota Managing Director & CEO
eferences;

1. Dr. M.Mahmaoudi Maymand (2005) E-commerce Deep & Deep publications pvt.Ltd. 2. Gordon, Natarasan (2006) Financial Markets & services Himalaya publication House Delhi. 3. P.R.Shukla, S.K.Rovchoudhary, (1992), Banking System, credit and Developments, Akashdeep publishing House, New Delhi. 4. N.Vinaykam (1993); A peep In To The Private sector Banks, kanishka publishers Delhi. 5. Khan Masood Ahamad (1992) Banking In India, Anmol Publications, New Delhi. 6. S.S.Hugar (1993), Trends And challeges To Indian Banking, Deep & Deep publications, New Delhi. 7. Vasant C.Joshi, Vinay V.Joshi (1998) Managing Indian Banks : The Challenges Ahead, Sage publications, New Delhi. 8. Frederic S. Mishkin (1998), The Economics of Money Banking and Financial Markets 5th edition an important of addition wesly Longman. 9. Mishra & Mishra, 2008, Bank Marketing, ISBN- 978-81-8356-347-5, Discovery publishing House pvt. Ltd. New Delhi. 10. Sharma S. P. (2008), Service Marketing, published by Paradise Publishers, Jaipur ISBN- 978-91-905349-8-7 11. Danciu Victor, 2010, Strategies for Higher Satisfaction of the Romanian Banking Customers. 12. M V Nair, 2007, Payment Systems in Banks, Banknet India 3rd conference. 13. Payment Systems in India - Vision 2005-08, RBI 14. Payment Systems in India - Vision 2009-12, RBI 15. Report on Trends and progress of Banking in India 2008-09, RBI 16. R.B.I. Annual Report 2002-03 and 2008-09.

17. Statistical Tables Relating to Banks in India 2008-09, RBI