Large value payments involve transfer of large bank depos its usually reflecting the settlement of transactions relating to financial markets. The enormity of such transactions can be gauged by the fact that total turnover in several large value payment systems and securities settlement systems over a period of two/three days is often found to be equivalent to the annual Gross Domestic Product (GDP) of a country (in India, the turnover in the large value payment systems segment constituted more than four-fifths of the total turnover—Rs. 3,51,16,277 cr of the total of Rs. 4,23,74,063 cr—in 2006-07.*
Any disruption in such systems will have serious systemic consequences affecting the financial markets and thereby the financial stability of the country. Hence, the need for an efficient, stable and reliable payment and settlement system in a country. Large value payment systems are classified as Systemically Important Payment Systems (SIPS) by central banks across the world.
A major transformation in payment systems across the globe happened since the last decade of the 20th century due to revolutionary possibilities offered by Information and Communication Technology. Now all type of payments using the banking channel and inter-bank settlement happens faster. Inter-bank settlements are shifting to Real-Time Gross Settlement (RTGS) system, from Deferred Net Settlement System (DNSS) basis, which are settled only at the end of the day. The shift to RTGS will provide safe, secure and cost-effective payment system, besides reducing credit risk in the settlement process. |
