Electronic Payment Systems in India

Money can be transferred from one person to another electronically through various electronic payment systems in India. The initiatives and steps taken by the Reserve Bank of India has created a strong technology based system for electronic payments, allowing seamless electronic fund transfer between two parties with very minimal transaction cost. In this article, we look at the different types of electronic payment systems currently operational in India.

Electronic Clearing Service (ECS)

ECS payment was introduced in India by the RBI during the 1990s. Since, its introduction, the platform has grown more robust and scaled to handle large volumes. ECS payments are used to handle bulk and repetitive payment like salary, interest, dividend payments of companies, corporates and institutions. Using ECS payment system, a customer accounts can be credited on a specified date for a specific amount.

National Electronic Funds Transfer (NEFT)

The NEFT payment system was introduced in 2005 to facilitate one to one fund transfers. NEFT payment system can be used by both individuals and corporates. NEFT system processes payments in batches at hourly intervals, thus providing near real-time settlement of funds from one party to another. There is no minimum of maximum limit on the amount of funds that can be transferred through NEFT.

National Electronic Clearing Service (NECS)

During September 2008, the Bank launched a new service known as National Electronic Clearing Service (NECS), at National Clearing Cell (NCC), Mumbai. NECS (Credit) facilitates multiple credits to beneficiary accounts with destination branches across the country against a single debit of the account of the sponsor bank. The system has a pan-India characteristic and leverages on Core Banking Solutions (CBS) of member banks, facilitating all CBS bank branches to participate in the system, irrespective of their location across the country.

Real Time Gross Settlement (RTGS)

In the RTGS system, funds are transferred from one bank account holder to another on a "real time" and on "gross" basis. Settlement in the RTGS system happens "Real Time" on a one on one basis and there is no bunching or batching like the NEFT system, wherein payments are processed in batches. Once a payment is processed through the RTGS system, it cannot be undone and is final and irrevocable. RTGS system has been operational since 2004 and is used for settling inter-bank payments.

Regional ECS (RECS)

Similar to NECS, RECS operates as a miniature of NECS confined to the bank branches within the jurisdiction of a Regional office of RBI. RECS system is available in Ahmedabad, Bengaluru, Chennai and Kolkata regions. Under the system, the sponsor bank will upload the validated data through the Secured Web Server of RBI containing credit/debit instructions to the customers. The RECS centre will process the data, arrive at the settlement, to provide credit/debit to the accounts of beneficiaries by using the Core Banking System put in place by the bank.

Electronic Clearing Service (ECS) Debit

ECS (Debit) system helps with effecting periodic and repetitive collections of bills from consumers. ECS (Debit) facilitates consumers to subscribe to services of companies and make routine and repetitive payments by ‘mandating’ bank branches to debit their accounts and pass on the money to the companies. There is no limit on the minimum or maximum amount of payment through the ECS debt system.

Electronic Funds Transfer (EFT)

The Electronic Funds Transfer system was introduced in the late 1990s to enable account holders of a bank to electronically transfer funds to another account holder. The EFT system has gradually been phased out for use by the general public and subsumed by the National Electronic Funds Transfer (NEFT) system.