Revised Access Criteria for Payment Systems (2011)

RBI/2011-12/193 DPSS.CO.OD.494/04.04.009/2011-2012 September 21, 2011 The Chairman/Managing Director/Chief Executive Officer All Scheduled Commercial Banks including RRBs/ Urban Co-operative Banks/State Co-operative Banks/ District Central Co-operative Banks/ Primary Dealers Dear Sir/Madam Access criteria for payment systems 1. A reference is invited to circular DPSS.CO. No. 528/04.04.009/2008-09 dated September 22, 2008 prescribing the access criteria for national payment systems.  1.1. With a view to strengthening the risk management framework, as also to facilitate wider access to payment systems, the Reserve Bank of India had constituted a Working Group to review of the existing access criteria guidelines. 1.2. It may also be recalled that in the Second Quarter Review of Monetary policy 2010-11 ( November 2, 2010- para 97 ), it was decided: a. to allow all licensed Urban Cooperative Banks (UCBs) (other than those under all inclusive directions) the facility of Indian Financial Network (INFINET) membership, current and subsidiary general ledger (SGL) accounts with the Reserve Bank; and b. to grant RTGS membership to only well-managed and financially sound UCBs having minimum net-worth of Rs.25 crore. 1.3. Based on the recommendations of the Working Group, and the announcement made in the Second Quarter Review of Monetary Policy (November 2010) and the consultations thereafter, the existing access criteria guidelines have been revised. 2. Revised access criteria 2.1. There will be two sets of access criteria viz. one for centralised payment systems and the other for decentralised payment systems . 3. Access criteria for centralised payment systems 3.1. The centralised payment systems include Real Time Gross Settlement (RTGS) System, National Electronic Fund Transfer (NEFT) system and National Electronic Clearing Service (NECS) and any other system as may be decided by RBI from time to time. 3.2. Membership to the centralised payment systems will be open to all licensed banks. 3.3. The revised uniform access criteria for centralised payment systems are given below: Minimum CRAR of 9% (as per the latest audited balance sheet); Net NPAs below 5% (as per the latest audited balance sheet); Minimum net-worth of Rs. 25 crore; and Recommendation of the regulatory department concerned. 3.4. An entity seeking membership to the centralised payment systems is required to apply in the prescribed application form (details at para 9.1). 3.5. All applications for access to centralised payment systems will be received by the Chief General Manager, Department of Payment and Settlement Systems, Reserve Bank of India Central Office, 14th floor, Central Office building, Shahid Bhagat Singh Marg, Fort,  Mumbai-400 001. 3.6. The recommendations of the regulatory department/s of the Reserve Bank will be obtained independently, and need not be furnished by the entity at the time of submission of the application. 3.7. In respect of all centralised payment systems (RTGS, NEFT, NECS) the entity on fulfilling the laid down access criteria would simultaneously be granted membership to INFINET, be eligible for opening  current account at the Deposit Accounts Department (RBI, Mumbai), SGL/CSGL account (RBI, Mumbai) etc., without any other additional requirements / prescriptions. 3.8. The opening/ operationalisation of the current account, SGL/CSGL account, INFINET membership will be subject to the entity fulfilling the documentation requirements and other formalities as prescribed by RBI from time to time. 3.9. In cases, where an entity is not seeking membership to payment systems but is desirous of opening a current account and SGL/CSGL account with RBI, the extant instructions/ guidelines/ process would continue to be applicable. As a logical corollary, entities which are already having a current account and SGL/CSGL account, INFINET membership and other pre-requisites for membership as prescribed for the said payment systems would need to apply only for accessing the centralised payment systems. 3.10. Primary Dealers will also be eligible for RTGS membership subject to the extant regulations and recommendations of the regulatory department concerned viz. Internal Debt Management Department (IDMD). For clearing organisations and other entities the Reserve Bank would consider membership requests on a case-to-case basis. 4. Access criteria for decentralised payment systems 4.1. The decentralised payment systems for the purpose of access criteria guidelines include Clearing Houses at MICR centres (including Cheque Truncation System centres) and Electronic Clearing Service (ECS) including the Regional Electronic Clearing Service (RECS) and any other system as decided by RBI from time to time. 4.2. Membership to the decentralised payment systems will be open to all licensed banks. 4.3. The revised uniform access criteria for decentralised payment systems are given below: Minimum CRAR of 9% (as per the latest audited balance sheet); Net NPAs below 5% (as per the latest audited balance sheet); and Recommendation of the regulatory department concerned. 4.4. An entity seeking membership to the payment systems is required to apply in the prescribed application form for decentralised payment systems (details at para 9.1). 4.5. All applications forms should be submitted to the President of the clearing house/ ECS centre. In clearing houses/centres managed by Reserve Bank of India, the extant procedures for granting membership will continue to be followed. 4.6. In other clearing houses/centres (not managed by the Reserve Bank of India), the President of the clearing house will seek the formal clearance of the Regional Office of the Reserve Bank of India before granting membership approval. The clearing house/ECS centre, based on the communication received from (RBI, DPSS RO/NCC) and after considering other requirements as applicable to the payment system, shall admit the member bank to the clearing house/ECS centre. Admission will also be subject to the member bank fulfilling other requirements as laid down in the Uniform Regulations and Rules for Bankers' Clearing House (URRBCH), procedural guidelines and instructions issued from time to time in this regard. 4.7. The recommendation of the regulatory department of the Bank will be obtained independently, and need not be furnished by the entity at the time of submission of the application. 4.8. For all decentralised payment systems the member bank on fulfilling the laid down access criteria would get eligibility for opening a current account with settlement bank without any other additional requirements / prescriptions. 4.9. The opening/ operationalisation of current account will also be subject to the member bank fulfilling the documentation requirements and formalities for such facilities as prescribed by settlement bank from time to time. 4.10 Notified institutions like Post Office Savings Bank will as hitherto be eligible for membership in decentralised payment systems. 4.11. The present relaxation granted to the State Co-operative Banks and the District Central Co-operative Banks and Post Office Saving Banks in membership to clearing house at MICR centres will continue. Unlicensed banks can continue to participate in the decentralised payment systems as sub-members.  Co-operative societies, as hitherto would not be either direct members or sub-members in any payment system. 5. Sub-membership 5.1. The different types of sub-membership for clearing houses would continue to be as defined under the URRBCH and/or respective procedural guidelines. 5.2. The current restriction on the number of sub-members a member bank can sponsor in MICR clearing houses is discontinued henceforth. However, sponsor banks may make a careful assessment of the risks associated while enrolling a new sub-member and take appropriate steps to mitigate these risks prior to sponsoring such institutions.  6. Review of membership 6.1. Once an entity is admitted as a member, it will generally continue to be a member so long as it is permitted to accept deposits or its participation in the payment system is not found to be detrimental to the smooth functioning of the product/system in any manner or its membership is not suspended/ revoked/ terminated as per the rules, regulations and guidelines of the respective payment systems. 6.2. Where concerns have been expressed on the financial conditions of an entity, in such cases, the Reserve Bank of India could initiate measures which may also include limits on presentations by such entities in the clearing house. The limits on presentations for such entities would be decided in consultation with the concerned regulatory/ supervisory department/s and/or the president of the clearing house. 6.3. RBI will have the authority to determine if a member can continue to participate in payment systems. RBI will have the right to revoke or withdraw the access of an entity to any of the payment system, if its continuation is felt to be detrimental to the smooth functioning of the payment systems in any manner. 6.4. Membership to the various payment systems will be reviewed on a bi-annual (once in two years) basis or at a frequency as considered appropriate by RBI. 7. Other issues 7.1. In the event of an entity which has access to payment systems, (and has a current and SGL/CSGL account and INFINET facility), being subsequently debarred from the payment systems or downgraded in access to the payment systems, the continuation or otherwise of the other facilities will be decided by RBI separately. 7.2. The payment systems would continue to be regulated by respective Membership Regulations, Business Guidelines and / or Procedural Guidelines which are binding on the participant members. 8. Date of implementation 8.1. The revised access criteria will come into effect from October 1, 2011. 9. Availability of the membership application form 9.1. The application forms for membership in respect of both centralised and decentralised payment systems along with all the relevant enclosures can be downloaded from the RBI website ( http://www.rbi.org.in ). 9.2 Entities who have submitted their applications for centralised/decentralised payment systems to the Reserve Bank and who have not been communicated of acceptance or refusal of the application are advised to submit fresh application in the revised format. Please acknowledge receipt of the circular. Yours faithfully (Vijay Chugh) Chief General Manager

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2011-12/193 · issued 21 Sep 2011. The plain-English explanation above is BankPulse’s own independent summary.

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