Page 32 - Banking Finance March 2021

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information such as the name of the debtor and the creditor. accounts' for making payments for the economic
These Loan deeds were witnessed by a person of transactions became a secure option. The central bank of
respectable means and endorsed by the loan-deed writer. any country is usually the authority and a driving force in
Execution of such kind of loan deeds were found continued the development of national payment systems. In India
during the Buddhist period also, when they were called as Reserve Bank of India is the sovereign authority and is
'inapanna'. responsible for Safe, Secure, Sound, Efficient and Authorised
payment systems in the country. The highest policy making
In the Mauryan period, an instrument called adesha came body on payment systems in the country is 'The Board for
into use, which was a kind of order on a person desiring him Regulation and Supervision of Payment and Settlement
to pay the money of the note to another person, which Systems' (BPSS), a sub-committee of the Central Board of
corresponds to the concept of a bill of exchange as we the Reserve Bank of India.
understand it today. Considerable use of these instruments
were found during the Buddhist period also. There are The BPSS is the regulating and supervising authority
references of merchants in large towns using similar empowered by RBI for prescribing policies and setting
instruments that like of letters of credit and promissory standards for all the payment and settlement systems in the
notes. country. The payment and settlement systems in India are
regulated by the Payment and Settlement Systems Act,
Similar loan deed were found to be existing in the Mughal 2007 (PSS Act) which came into being in December 2007.
period which were known as 'dastawez' and were of two The PSS Act as well as the Payment and Settlement System
kind: 'dastawez-e-indultalab' which was payable on demand Regulations, 2008 framed there under became effective
and 'dastawez-e-miadi' which was payable after a stipulated from August 12, 2008. Section 4 of the PSS Act states that
time.We have the testimony of foreign travellers regarding no person other than the Reserve Bank of India (RBI) can
the use of bills of exchange in the then great commercial commence or operate a payment system in India unless
centres of Mughal era. From their writings, it is established authorised by RBI.
that a kind of banking system existed and bankers also issued
bills of exchange on foreign countries, mainly for financing The RBI is taking a studied stance with reference to ushering
sea-borne trade. These bills were widely accepted and were in changes to and in the payment systems. Periodically it
traded at discounts. Another instrument that was in use has constituted various committees like the Rangarajan
during the Mughal period was the Pay order. These orders Committee I & II, Saraf Committee, Patil Committee,
also known as 'Barattes' were issued from the Royal Treasury Burwan Working Group, etc. for the benefit of banking
on one of the District or Provincial treasuries and were akin sector and particularly the payment systems. Since the year
to present day drafts or cheques. 1998 onwards, The Reserve Bank has been continuously
bringing out a Payment System Vision document for every
During these developments, the most important class of three years which enlist the road map for implementation.
credit Instruments that evolved in India and was in most The latest one is for the period 2019 -21.
widespread use in the twelfth century were 'Hundis'. They
have continued till today and in a sense represent the oldest Coming back to the discussion of evolution of payment
surviving form of credit instrument. Hundis were of various systems, for effecting the transfer of money in bank
types and each type had certain distinguishing features. accounts, a payment instrument was needed to instruct the
Hundis had a widespread use as a remittance instruments bank to effect that transfer. The instrument so employed
(to transfer funds from one place to another), as a credit was the 'cheque' for a very long period. Thus a system
instruments (to borrow money) and for trade transactions consisting of the cheque as the payment instruments and
(as bills of exchange). an infrastructure around the cheques which consisted of the
drawee bank, the drawer bank and the cheque clearing
The Present: houses came on the scenario and were collectively known
In the 20th and 21st century, as the banking system evolved, as the payment systems.
it became easier, safer and even remunerative to keep one's
money in a bank account. To use 'transfer of money in bank This cheque clearing systems have since been migrated from

32 | 2021 | MARCH | BANKING FINANCE