The Reserve Bank's plans to introduce real-time funds transfer is yet another step in the harnessing of the revolution in telecommunications to the needs of the financial services industry. Financial infrastructure in India is weak and this is one of the reasons for the lack of integration between the various financial markets in the country. Settlement delays are a major cause of inefficiency, with corporate funds being blocked in the pipeline for days.The real-time gross settlement system being set up by the RBI will speed up the movement of funds, helping companies to eliminate the blockage in working capital. Such electronic funds transfers between offices of the same bank have been in operation for quite some time now.
What was needed was a system for transferring funds between different banks, and the RBI's proposed system seeks to address that need. Priority will be given to large value wholesale transactions, and corporates will greatly benefit. Of course, the improvement will be only so far asremittance of funds is concerned -- getting outstation cheques cleared will continue to take time.
The real-time funds transfer facility will also need a queueing mechanism, which will presumably be inbuilt into the system. It may sometimes happen that the messages of one bank may remain blocking the system because that bank doesn't have enough balance with the RBI. This situation would need redressal. Further, it is also true that banks will need higher levels of liquidity consequent to the introduction of the real-time settlement. This is because at present banks are required to fund their account only at the time of settlement of inter-bank clearing. A continuous settlement will require more liquidity, which the Reserve Bank will have to provide.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
