Wednesday, December 7, 2011

eCheque - The time has come in India

In simple terms, an eCheque is an electronic funds transfer that withdraws money directly from your bank account. It's just like writing a cheque, only it is done electronically

Worldwide it is familar to Paypal consumers.

As per Paypal website,
eCheques are payments from buyers who have attached their bank details to their PayPal account, but do not have a valid backup funding source such as a credit or debit card. It may also be that their backup card has expired. So to ensure that a secure payment can still made, an eCheque is generated.

Sending an eCheque is a bit like sending someone a paper cheque, only it is done electronically. And because it is processed by PayPal, the payment is also protected and the sender and recipient do not need to share their financial details.

In Indian context, ICICI Bank, way back in 2002 had introduced this concept. This was built around RBI EFT system. However, as EFT has since been discontinued, ICICI’s Bank eCheque too has been discontinued.

RBI’s EFT was popular, prior to NEFT/RTGS taking off. Once, NEFT/RTGS started becoming popular, the EFT slowly died a natural death.

In Dec 2011, in a speech by deliverd by Shri G Padmanabhan, Executive Director, Reserve Bank of India, at the Foundation Day of Catholic Syrian Bank, Thrissur on 26/11/2011, titled ‘Payment System Issues and Challenges’, the work e-cheque was again mentioned.

The major drawback of the current ePayment modes in India i.e RTGS/NEFT/POS Terminals  Card, do not have the facility of Post-dated concept. All RTGS/NEFT/POS Terminals’ transactions are instant i.e the remitter’s account is debited instantly.

The remitter cannot issue Post-dated ePayment instructions. Of course, it is an interesting discussion on the need for Post-dated physical cheques.

Electronic Clearing Services(Debit) services to some extent offer Post-dated facility for ePayments. However, these have a very limited scope and do not offer the flexibility of true eCheques

At the highest policy levels, the eCheque as a concept seems to have germinated. Hence, this will become a reality in India, sooner or later.