investments through the internet was introduced. while eliminating the systemic risks that was involved in the high value and time critical transactions, the central bank became the owner and operator of both the rtgs and sss systems. the service provider of the retail payment system is lankaclear ( pvt ) ltd which is owned jointly by the central bank and the commercial banks. two weeks ago, lankaclear ( pvt ) ltd introduced the cheque imaging and truncation system to ensure that cheques deposited in any part of the country is cleared and settled within two days except in uncleared areas. the cheque imaging system eliminates regional disparities in cheque clearing and establishes a common clearing schedule. in addition to these two systemically important payment systems, there are other small scale payments and settlements arrangements. they include the slips system which is also owned and operated by lankaclear and the us $ clearing system operated by a commercial bank. mr anura de silva, general manager lankaclear will give you the technical details of the cit system including some of the glitches that have surfaced in implementing the cheque imaging project. let me now deal with the institutional and legal arrangements and the impact of payment reforms very briefly. the focus will be on ( i ) the market arrangements for payment services ( ii ) the legal and regulatory framework ; ( iii ) the coordination of oversight of the payment system and regulation affecting the system ; and ( iv ) mechanisms for consultation with stakeholders. the rtgs and sss systems speedily transfer funds and make settlements of banks, primary dealers, financial institutions, investors, customers, the government and the public. these two systems bring about financial discipline among these stakeholders as they have to maintain adequate cash and reserves in their accounts to meet payment obligations. this also improves the liquidity management by banks as treasurers and fund managers have to produce accurate estimates of their daily liquidity requirements. more importantly, the users of the rtgs and sss systems can use central bank funds throughout the day for settlement purposes and return them at the end of the day. subject to the availability of acceptable collateral, the banks and primary dealers are provided with intra day liquidity by the central bank. to underpin the payment reforms undertaken by the central bank and enhance integrity and safety of such systems, a comprehensive legislation to govern payment, clearing and settlement systems in general and to provide the central bank with oversight and regulatory powers over various payment systems and money transfer service providers has been enacted

ranee jayamaha : the significance of payment reforms in financial system stability opening address by dr ranee jayamaha, deputy governor of the central bank of sri lanka, at the seminar on “ payment systems and cheque imaging ” organised by the royalist bankers ’ club, colombo, 25 may 2006. * * * let me thank the president and members of the royal bankers ’ club for inviting me to deliver the opening remarks at the seminar on ‘ payment systems and cheque imaging ’. i am honoured to be speaking to this distinguished group and it is encouraging to note that the subject is of interest to a good cross section of the financial community. in my opening remarks, i will give an overview of the significance and rationale of payment reforms in financial stability and then set out the impact of payment reforms on the financial system, institutional arrangements that are in place, and the need to change payment practices of banks and the public. it may also be important to note that the term “ payment systems ” covers payments, clearing and settlement systems. as you are aware, the central bank ’ s role in the payment system stems from its primary function of providing payment, clearing and settlement service. economic policy reforms, the ever increasing complexities in the financial system and the changing role of central banks have resulted in central banks to be at the center of payment reforms which, from the central banks ’ point of view, is helpful in achieving the objective of financial system stability. the national payment system is the backbone of a country ’ s monetary and financial system and it plays a critical role in a country ’ s economic development. it is through the payment system that money is transferred between savers and lenders, buyers and sellers or from one point to another. developing a national payment system is an ongoing process. by reforming and developing the national payment system, it is possible to reduce the overall transaction costs and expand opportunities for commercial and financial transactions in an economy. in recent years, there has been a rapid acceleration in fundamental reforms to national payment systems worldwide, although the pace of implementation of reforms in different countries has been uneven. planned outcomes have not always been achieved in terms of expected use, benefits or costs of payment system reform projects and many planned reforms have been unexpectedly slow to complete. in its modernization programme which commenced in 2001, the central bank refocused on its core objectives, i. e. the economic and price stability and the financial system stability. the financial system stability objective encompasses a wide range of subjects