issue of topical interest. i thought it fit to flag certain current and emerging issues in payment systems. it is important to appreciate that it is the effective functioning of robust payment systems that reduced the severity of the impact of the economic crisis and the shocks. i therefore wish to raise a few questions that straddle across the various dimensions of the payment systems and offer comments which more than providing answers would hopefully lead to a greater debate among stakeholders. 1. why so much ado about an “ efficient payment system ”? are indian payment systems efficient? the importance of payment and settlement systems could be gauged from the imf publication “ central banking lessons from the crisis ” ( may 27, 2010 ) which states that : “ the crisis would have been much more severe had central banks not taken efforts to introduce robust payment and settlement systems, including for foreign exchange, over the two decades ahead of the crisis. the systemic impact of failure of a financial institution depends critically on the robustness of the infrastructure underpinning those markets in which it is active. central banks, which in many cases are engaged in oversight of these systems, should play an important role in this regard, in cooperation with securities regulators and supervisors of individual institutions ”. bis central bankers ’ speeches the central bank interest in payment systems arises on account of critical roles played by an efficient payment system with respect to ( i ) financial stability ; ( ii ) economic efficiency ; ( iii ) monetary policy transmission ; and ( iv ) fiscal policy implementation. financial stability : generally, any strains in the financial system are likely to be first reflected in the payments system, with settlements being affected due to liquidity issues faced by one or more of the participants. due to the interconnected nature of payment systems, such disturbances have the potential to transmit themselves to other financial institutions as well, leading to issues of financial stability. let me illustrate this by drawing your attention to the fact that in some countries, the payment system turnover to gdp ratio is more than 100. the significance of this number is that it means that the turnover in the payment system over a period of three days is equal to the gdp ( of that particular nation ). therefore, any disturbance in the orderly functioning of the payments and settlement system could disrupt the smooth functioning of the economy, the markets, the financial market infrastructure and the participants themselves. as flagged earlier, the recent financial crisis demonstrated the importance of payment and settlement systems. the smooth and efficient functioning of the payment and settlement infrastructure enabled the market

of ubiquity in the sense access to payment systems should be simple, easy, convenient, cost effective for the “ aam admi ”. third indian payment systems need to continuously innovate products, channels and business models. technology should facilitate the convergence of payment products. fourth recent surveys worldwide indicate mobile and nfc are the future payment trends. given the huge potential for both mobile and nfc as the future payment products, we should see the adoption and integration of these into our payment systems. fifth, our payment systems should be able to provide a low cost solution to bring government payments, e - commerce, etc, into its fold. sixth, safety and security of payment systems instil public confidence. our payment systems should meet the emerging challenge of frauds and be the trend setter for security i once again felicitate the csb ltd on this momentous day. thank you. bis central bankers ’ speeches