What changed
RBI has mandated that all large value payments of Rs. 1 crore and above between regulated entities and in regulated markets must be processed through electronic payment systems like RTGS, NEFT, or ECS. This replaces the earlier practice where such payments could be made via paper instruments. The mandate takes effect from April 1, 2008.
What it means for you
Banks and other regulated entities must immediately upgrade their systems to handle high-value electronic payments exclusively. This reduces risks associated with paper-based clearing cycles and aligns with RBI's push for safer, faster payment systems. Non-compliance could lead to operational disruptions or regulatory scrutiny.
What you must do
- Ensure all payment transactions of Rs. 1 crore and above between RBI-regulated entities are processed only through RTGS, NEFT, or ECS from April 1, 2008.
- Update internal systems and procedures to reject or redirect paper-based high-value payments to electronic modes.
- Communicate this mandate to all relevant departments, including treasury, operations, and compliance, and confirm readiness to RBI.
- Monitor compliance and report any issues to RBI as required.
Who it affects
All commercial and cooperative banks, Primary dealers, Non-banking financial companies (NBFCs), Entities in money market, government securities market, and foreign exchange market
What is the threshold for mandatory electronic payments?
All payment transactions of Rs. 1 crore and above must be routed through electronic systems like RTGS, NEFT, or ECS.
When does this mandate come into effect?
The mandate is effective from April 1, 2008, for both inter-entity payments and payments in regulated markets.
What happens if we continue using paper instruments for such payments?
Paper instruments for transactions of Rs. 1 crore and above between regulated entities are no longer permitted. Non-compliance may attract regulatory action.