assessing what might drive change and influence outcomes for payment systems, we must start by understanding the public goals. regardless of the mechanism involved, people expect the payments system to possess at least three fundamental characteristics. first, it must have integrity, i. e. transactions must be safe, reliable, and secure. second, it must be accessible and available to all. finally, it must be competitive and efficient, i. e. the cost of making payments should be affordable. to make an effective contribution to the development of payments & settlements and also to increase trade and investment flows nationally and regionally, it is necessary to identify the common themes in the form of public policy goals. in this context, the central banks are called upon to take certain minimum actions to further these goals. 6. 2 however, the manner and intensity of the current involvement of central banks in payment systems development differ from one country to another. the roots of each central bank ’ s specific pattern of involvement lie in the different institutional structures and traditions of each country. the central banks may accordingly decide on appropriate action, beyond the minimum, which depends on the national and institutional background. 7. importance of regional efforts 7. 1 by and large, central banks in the saarc region and elsewhere are currently involved with payment systems in three main ways, namely, in an operational capacity, as payments system overseers, or as catalysts or facilitators of market and regulatory evolution. 7. 2 as all central banks are aware, markets may encounter persistent impediments to payment systems development and may become unable to produce efficient and safe services. the existence of such impediments would give rise to policy issues for central banks, especially due to their responsibility in achieving the core objectives, such as price stability and financial system stability. these impediments can take the form of legal and regulatory inefficiencies, structural and performance weaknesses of the markets, the outmoded standards and infrastructure used, or the lack of attention by the central banks and regulatory authorities. while it is important for the national central banks to address these issues and find remedial action early, given the increase in trade, investment and crossborder financial flows, it is essential for the region to have a common understanding and apply, where possible, common standards. 7. 3 the design of every payment system requires a series of trade - offs between the different elements of its objectives. the precise outcome of these trade - offs will vary

, because they will be closely based both on national realities and international best practice. this emphasizes the need for close and continuous consultation in each country between the suppliers of payment services and the central banks as the overseer and regulator of the systems. the ultimate target of these consultations is to ensure the easy availability in each country of a payment system that meets the needs of its users, that enables the suppliers to cover their costs, and that does not absorb an excessive proportion of the national resources. that is why many regional payment system development initiatives have sprung up over the last few decades. for example, south african development community ( sadc payments initiative – 1996 ), the western hemisphere payments initiative ( 1999 ) ; the commonwealth independent states payments initiative ( 2004 ) ; and the arab payments initiative ( 2005 ) are some of the well functioning regional payment initiatives. the common objective of all these efforts is to identify possible measures for improving the safety, efficiency and integrity of the regional payment systems. 7. 4 the most demanding factor, common to all, is the rapidly changing global payment system infrastructure that is challenging the existence of domestic and regional payment systems, which are lagging behind. given the increasing sophistication of cross - border transactions, the need to mitigate risks involved in using outmoded infrastructure has to be given priority. the saarc payment system development strategy should therefore be designed to cater not only to the region ’ s present needs, but also its future demands. 8. how does the saarc payments initiative work? 8. 1 let me briefly set out the proposed institutional structure of the saarc payments initiative. 8. 2 by consensus, hon. governors of the saarc central banks requested the central bank of sri lanka to take the lead in this effort. we are happy to be the catalyst and promoter, but hope that at an appropriate time, this initiative will be driven by the other saarc member central banks. in consultation with the saarc governors, we have already appointed a saarc payments council ( spc ), which is composed of the chairpersons of the national payments councils ( npcs ) in each of the saarc member countries or by senior officials appointed by the governors of central banks in countries which do not have npcs. the npcs or payments committees will coordinate and liaise with all stakeholders in the payments area, in particular, banks and financial institutions, stock exchanges, securities traders, stock brokers, service providers,