What are the risk mitigation strategies in payment systems?

There are a few large value payment systems functioning in the country. These are the Inter-Bank Cheques Clearing Systems (the Inter-bank Clearing), the High Value Cheques Clearing System (the High Value Clearing), the Government Securities Clearing System (the G-Sec Clearing), the Foreign Exchange Clearing System (the Forex Clearing) and the Real Time Gross Settlement (RTGS) System. All these systems except the High Value Clearings are electronic based systems. Interbank transactions at all places should be migrated to RTGS System and High Value Clearing Systems are to be made secured netting systems by introduction of guarantee funds.

The payment system should use the latest technolgy and innovate new stragegies for operational risk. Operational procedures would include the implementation of risk management decisions through limits on exposures, by pre-funding or collateralizing obligations, through the design and management of transactions queues or through other mechanisms. For example, for enhancing security of messages, PKI based digital signatures can be introduced. Credit transfers to be encouraged and in electronic mode and provide for high availability of all systems.

In my opinion, all Payment and Settlement Services should be made available on a national level ie., National ECS, National EFT and National CTS. By implementating National Settlement System for posting the net position of the clearing participants in all clearing houses in the country can help in reducing risk.