Queuing arrangements
Generally, all RTGS system across the world incorporates queuing
arrangements. In the Indian context also such arrangements may be
necessary. Issues related to queuing arrangements are its
mechanism and transparency. As per "First in first out" (FIFO) rule,
payment order received first is first to be released. It may be possible
under FIFO rule that a very large payment order at the top of queue
may not be released due to insufficient covering funds. This may lead
to blocking the orders below it and system becoming congested
turning into a liquidity gridlock.
There are two ways to overcome above situations :- Queue
arrangements being done by central bank or banks managing their
queues. In case the queues are managed by RBI, frequent queue
management (reordering) by RBI might induce banks to regularly rely
on this and might in turn encourage them to reduce their liquidity
holdings leading to long queues. Management of queue by individual
banks will provide them with greater flexibility in settling their
payment order. However, in such a situation, queuing arrangement
might be less efficient as individual banks may not be having full
information about the system as whole. Furthermore, if the RTGS
system is linked to delivery versus payment (DVP) system which is
mainly undertaken incase of securities, it may affect the efficiency of
DVP system as request of funds have to be routed through internal
queues of banks, which may cause delay in fund transfer thus
defeating the very purpose of DVP. RBI controlled queue
management may be preferred as it takes care of queuing
arrangements of the whole system. Individual banks may be allowed
to attach priority to their message orders. However, proper guidelines
have to be formulated and agreed upon by RBI and member banks.
Further, frequent intervention in queue arrangement by RBI should be
minimal and banks should be penalised in cases where a large
number of transfers are held up due to insufficient balances.
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
Transparency of queued incoming transfer means an operational
environment wherein information regarding queue status of other
banks is available to individual bank. As to its utility, there are two
schools of thought. First school of thought of opaque queuing
advocates that, in case queue status is kept transparent, the
individual banks will have information of queued incoming funds and
in that anticipation they may reduce their liquidity. If there is any
delay or default in settlement of that transfer, the receiving bank
could face liquidity shortfall, thus exposing itself to liquidity risk.
Another school of thought advocates that, transparency in queuing
arrangements will reduce liquidity risk rather than increasing it.
Transparency will provide better information about incoming funds,
hence it will enable the banks to adopt efficient liquidity
management and they will be in a better position to manage the
sequencing of incoming and outgoing transfer. Thus transparency
appears better than opaque system of queuing arrangements.
The issues concerning advanced and sophisticated technology and
communication system to be used for RTGS are related to security
risks, operational and maintenance aspects. Security risks generally
stems from the unauthorised access to the system. By unauthorised
access to the RTGS system confidential information pertaining to
banks or its customer, could be retrieved and used. Security related
risk can be controlled by limiting access to authorised personnel, by
encrypting information transmitted across the system, usage of
dynamic password, etc. Smooth and reliable functioning of RTGS
system is also dependent upon reliable computer and networking
systems.
Introduction of RTGS system in India will not only reduce the
systemic risks but will also ensure speedy and reliable payment
transfers. This in turn will call for better liquidity management.
Liquidity constraints could be overcome overcome by unifying RTGS
account with reserve requirements, extension of credit to banks,
whether collateral or otherwise. There should not be heavy or
complete reliance on queuing arrangements, as long queues may
lead to congestion resulting in gridlock, thus undermining the very
essence of real time gross settlement system.
