IBA plans firm for centralised clearing system

Indian Bank's Association (IBA), in association with member banks, will form a company that will act as an umbrella organisation for operating all retail payments and settlement systems in India.

The umbrella organisation will own and operate the clearing system in India. A slew of banks including ICICI Bank, Citibank, Standard Chartered Bank and 12 public sector entities are likely to pick up stake in this company.

At present, there are 1,050 clearing houses in India. In addition to this the RBI had appointed State Bank of India and its associates and 12 public sector banks as its clearing agents.

"The company will act as a holding body and the 1050 clearing houses will act as franchisees," said Reserve Bank of India executive director R B Barman.

"The IBA has conveyed its in principle approval to co-ordinate the formation of this company to the RBI," said Barman.

"The proposed company will be formed by a group of banks based on their participation in the clearing system and the existing 12 PSU banks will also have an equity stake in this company," said a senior IBA official.

Banks like ICICI Bank, Citibank and Standard Chartered Bank are large participants in the clearing system and could pick up stakes in the company, he added.

"IBA has formed a working group which has representatives from public sector banks, private banks, foreign banks and co-operative banks," said the official.

"The working group will decide on the nature and the model of the company," said the IBA official.

This is following the Reserve Bank of India (RBI) announcement in the annual policy suggesting the need for a new umbrella organisation for retail payments systems.