Today, as many economies are globalizing themselves, Effective Payment System (EPS) is crucial because it operates under different types of risk environment. EPS provides many benefits to a bank and economy. Group of 10 developed economies has also issued the core principles that a well-organized payment system should have. Central Banks have a key role to play in making payment system effective and efficient. Other participant should also adhere to the norms for making payment system a robust one.

Payment systems constitute the means by which inter-bank transfer of funds takes place across both domestic and international financial systems and markets. A Payment system is a process that comprises of a set of instruments for effecting payments. It is built on the strength of an institutional and organizational framework that regulates payments. Within this process, operating procedures are established and communications networks are maintained. The sophistication of the system depends on the level of requirement. A typical modern payment system contains various subsystems, which serve particular needs of customers, both in terms of the volumes of transactions and values of payments. The payment system holds the key in so far as the payment systems take into account factors such as the speed, financial risk, reliability and cost of domestic and international transactions.