Rtgs Debut Likely This Fiscal Sans Pds

The real time gross settlement (RTGS) system is likely to debut by the end of the current fiscal and will not have room for primary dealers.

The Reserve Bank of India (RBI), which is spearheading the national payment council (NPC), is understood to have taken an in-principle decision to give only banks access to the RTGS system.

NPC is the apex body that has been constituted to decide on the infrastructural support for the reforms process in the payment system.

According to market sources, the decision has been taken in line with the international norms wherein the RTGS is limited only to banks.

 

However, the association of primary dealers has taken up the matter with the RBI, seeking a review of its decision.

According to sources, primary dealers constitute around 30 per cent of the total settlement volume as per the figures released by the Clearing Corporation of India Ltd.

Dealers also pointed out that while RTGS is expected to bring about a paradigm shift in the settlement systems, the facility should also be extended to PDs who are one of the active participants in the market as far as government securities are concerned.

Some dealers said that allowing dealers might create a risk-related problem in the system. This is because under RTGS, a deal has to be settled at the time when it is struck and this requires the immediate availability of funds.

While banks do not have a problem with this, the capital base of primary dealers is a constraint in most cases.

On the other hand, a section of the market feels that the problem of liquidity can be solved by entering into arrangement with banks for a line of credit.

In fact, the report of the payments committee had stated that adequate management of systemic risk is one of the primary areas of concern for the regulator.

The group had recommended that the interbank clearing system, the high value clearing system, the securities clearing and settlement system, the MICR clearing system, the proposed government securities and foreign exchange clearing systems, and the real time gross settlement system are the systemically important payment systems.

RTGS is regarded as the centre piece of an integrated payments system that will enable real time and on-line fund management for the financial system.

In fact, access to cross border settlement systems such as the TARGET in Europe is conditional to the availability of a full fledged domestic RTGS for each of the participating countries.