Money transfer outside banking system

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  Money transfer outside banking system

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1. The story: The RBI proposed to enable payment system operators regulated by the central bank to take direct membership in RTGS and NEFT.
2. Details: People will be able to transfer money to another person without depending directly on a bank through RTGS, NEFT and centralised payment systems (CPSs) of RBI. This is expected to minimise settlement risk in the financial system and non-banks can expand their foothold in the traditional area of banking. But entities will not be eligible for any liquidity facility from RBI to facilitate settlement of their transactions in these CPSs & the facility is subjected to an overall limit of Rs 2 lakh.
3. Iimplications: This move of opening the payment system to non-banks would increase digital payments and transactions significantly. It will prepare a digital trail of all individuals doing digital transactions on channels outside the banking system, which could help the overall financial system. Until now, an individual’s credit profile was available primarily with the banks. Now, individual credit profiles can also be tracked while taking a loan from FinTech Company, investing through it or spending through it.
4. Who can do it: The RBI will now allow non-bank entities — Prepaid Payment Instrument (PPI) issuers, Card Networks, White Label ATM, TReDS platforms — to become members of CPS. Mobile wallets like Google Pay, Mobikwik, PayU, Ola Money, PhonePe and Amazon Pay can provide NEFT and RTGS facilities to their customers. But this transfer will be allowed only to KYC compliant entities.
5. Hike in cash limit: The RBI has decided to increase the limit of outstanding balance in PPIs of non-banks from the current level of Rs 1 lakh to Rs 2 lakh. This will facilitate and incentivise online transfer and cash withdrawal from non-banks and enable them to go for full KYC compliance and interoperability. Interoperability of the PPI wallet will expand the market size and will be beneficial to the end consumers. 

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