RBI Centralises Inter-bank Charge Settlement for Retail E-Payments
Current · Source: Reserve Bank of India · RBI/2011-12/111 · issued 13 Jul 2011 · ~1 min read
Quick answerRBI has shifted the calculation and settlement of inter-bank processing charges for NEFT, NECS, RECS, and ECS from individual banks to Clearing Houses/Processing Centres using multilateral netting, effective July 2011.
The rule, in the simplest words
Banks no longer settle processing charges with each other for NEFT, NECS, RECS, and ECS; the Clearing House does the calculation and payment.
The Clearing House uses multilateral netting (adds up what each bank owes and is owed, then settles only the net difference).
Service tax is still calculated on the total (gross) amount each bank should have paid before netting, and banks get MIS reports to send the tax to the government.
Each bank must update its software so it can share data with the Clearing House and use the MIS reports for tax remittance.
The new arrangement will be reviewed after three months.
How it plays out — a real example
Rohit, the payments operations manager at Bank of Baroda in Mumbai, checks the daily MIS report sent by the Clearing House, confirms that his bank’s service‑tax amount matches the gross obligations, and ensures the updated software correctly sends the net settlement figures to the Clearing House. He then files the tax payment and informs his manager that the new process is running smoothly.
What changed
Previously, banks had to individually settle compensation payable/receivable with other banks. Now, Clearing Houses/Processing Centres will calculate and settle these charges using multilateral netting, including service tax on gross obligations. The arrangement will be reviewed after three months.
What it means for you
This centralisation reduces operational burden on banks by automating inter-bank charge settlements through Clearing Houses. Banks must ensure their systems align with the new process and use MIS reports for service tax remittance. It streamlines reconciliation but requires software updates.
What you must do
Advise your Clearing House/Processing Centre to implement necessary systems for multilateral netting of charges.
Ensure your bank's software is updated to support the revised settlement process.
Use the MIS reports provided to accurately remit service tax on gross obligations to the government.
Confirm receipt of this circular and report action taken to RBI.
Who it affects
Member banks participating in NEFT, NECS, RECS, and ECS, Clearing Houses and Processing Centres, Bank IT and operations teams handling payment systems
❓ Common questions
What is the key change in this circular?
Clearing Houses/Processing Centres will now calculate and settle inter-bank processing charges using multilateral netting, instead of individual banks handling settlements.
How is service tax handled under the new arrangement?
Service tax is calculated on gross obligations of banks, and MIS reports are provided to help banks remit the tax to the government.
When will this arrangement be reviewed?
The arrangement will be reviewed after a period of three months from the circular's date.
📜 Read the original circular — full text as issued by RBI
RBI/2011-12/111
DPSS (CO) EPPD No./ 94 / 04.03.01/ 2011-12
July 13, 2011
The Chairman and Managing Director / Chief Executive Officer
of member banks participating in NEFT / NECS / RECS / ECS
Madam / Dear Sir,
Retail Electronic Payment Systems –NEFT / NECS / RECS / ECS – Levy of Processing Charges- Collection & Settlement of Inter-bank Charges
Please refer to our circular DPSS (CO) EPPD No. 2649 / 04.03.01 / 2010-11 dated June 02, 2011 on the above subject.We have been receiving a number of requests from the member banks that the settlement of compensation payable / receivable to / from other banks may be undertaken by the Clearing Houses / Processing Centres, rather than by individual banks as indicated in Para 3 of our circular under reference.
2. On a review, it has been decided that Clearing Houses / Processing Centres will now calculate and settle the charges payable as prescribed in the circular. Under the revised arrangement, the charges payable by the originating banks to destination banks (including the service tax applicable thereon), will be calculated and settled by the Clearing Houses using the multilateral netting method. However, the service tax will be calculated on gross obligations of the banks.Necessary MIS reports will be provided to the banks to enable them to remit the service tax to the Government.
3. All the banks managing Clearing Houses / Processing Centres may advise the Clearing Houses /Processing Centres to put in place necessary systems to undertake this work.The application software is being modified suitably for this purpose.
4. Other details given in the circular remain unchanged.
5. This arrangement will be reviewed after a period of 3 months.
6. Please confirm the receipt of this circular and action taken in the matter.
Yours faithfully
(G. Srinivas)
General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2011-12/111 · issued 13 Jul 2011. The plain-English explanation above is BankPulse’s own independent summary.
Advise your Clearing House/Processing Centre to implement necessary systems for multilateral netting of charges.
Ensure your bank's software is updated to support the revised settlement process.
📜 Compliance
Use the MIS reports provided to accurately remit service tax on gross obligations to the government.
Confirm receipt of this circular and report action taken to RBI.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are an Operations officer at a bank this circular applies to (Member banks participating in NEFT, NECS, RECS, and ECS, Clearing Houses and Processing Centres, Bank IT and operations teams handling payment systems), your first concrete step on “RBI Centralises Inter-bank Charge Settlement for Retail E-Payments” is: “Advise your Clearing House/Processing Centre to implement necessary systems for multilateral netting of charges.” (RBI issued this 13 Jul 2011).
Action required: Advise your Clearing House/Processing Centre to implement necessary systems for multilateral netting of charges.
Action required: Ensure your bank's software is updated to support the revised settlement process.
Action required: Use the MIS reports provided to accurately remit service tax on gross obligations to the government.
Action required: Confirm receipt of this circular and report action taken to RBI.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=6611&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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