The Hindu : Panel favours issuance of multi-purpose e-money by banks

Online edition of India's National Newspaper
Tuesday, Aug 06, 2002

Business

Business

Panel favours issuance of multi-purpose e-money by banks

MUMBAI AUG. 5. A Reserve Bank of India constituted working group on electronic money has recommended that multi-purpose e-money may be permited to be issued against payment of full value of central bank money or against credit only by the banks.

The issuance of e-money on credit basis should, however, be strictly regulated and closely monitored, the group chaired by the Hongkong and Shanghai Banking Corporation chief executive officer, Zarir Cama, has recommended in its report submitted to the RBI.

Dwelling on as to why only banks should be issuers of e-money, the group outlined five reasons, including attributes of e-money being closure to demand liabilities of the bank and implications on velocity of circulation of money and corresponding impact on monetary statistics.

However, single and limited-purpose e-money should be allowed to be issued by any entity including banks.

If e-money was issued on credit, there was a possibility that issuers may assume a leveraged position and there was a need for continuous monitoring of behaviour of issuing authorities for growth of their assets and liabilities.

The RBI should regulate and closely monitor the practice of issuing e-money on credit, the group said.

Non-banks should not be permitted to issue multi-purpose e-money and if allowed, they along with banks should conform to seven minimum prudential requirements as laid down by the European Central Bank such as supervision by the RBI and solid and transparent arrangements codifying rights and obligations of issuers, merchants, consumers and regulators.

Broadly, e-money was an electronic store of monetary value on a technical device and could be classified as pre-paid stored value card and pre-paid software based product that uses computer networks such as Internet.

The stored value card could be of three types — single-purpose card, closed-system or limited-purpose card and general-purpose or multi-purpose card. The single-purpose card was designed to facilitate only one type of transaction such as telephone calls, public transportation cards while closed-system or limited-purpose cards were generally used in a small number of well-identified points of sale within a well-identified location such as corporate/university campus.

The multi-purpose card on the other can perform variety of functions with several vendors — credit card, debit card, stored value card, identification card, repository of personal medical information.

The report submitted by the group to the RBI on July 11 has been placed for comments on the apex bank's website. — PTI

Printer friendly page
Send this article to Friends by E-Mail

Business